Stock Kisses are an important concept to understand the behaviour of a stock and the structure of the overall market.
Let me explain the concept of Stock Kisses by a fairy tale.
STORY BEGINS HERE ==============
Once upon a time,long long ago, there was a crazy young man named Mr. Stock.
Mr. Stock was hyper emotional and moody..That means sometimes for no reason at all, he would be really happy and sometimes he would be sad and depressed.
When he was happy, he would be laughing and screaming and jumping up and down all day long.
When he was depressed, he would just sit and stare and do nothing. He would neither eat nor drink.
He had a lady friend called Miss 20DMA (Twenty Days Moving Average).
Whenever Mr. Stock was tired and depressed he would go over to Miss 20DMA and tenderly kiss her on her rosy cheeks.
If Miss 20DMA smiles, he becomes happy and excited all over again and starts screaming and laughing and jumping up and down. ( I told you before that Mr. Stock was emotionally unstable..)
If Misss 20DMA resists him and shoves him away, he gets depressed and sad.
However, hope is not lost, my friend!!
He has another lady friend named Miss 50DMA (Fifty Days Moving Average). He goes and searches for this second lady friend and tried to tell her about his tragic story.
Mr. Stock then tries to passionately kiss Miss 50DMA on her cheeks.
If she smiles back, he forgets his misery and starts laughing and screaming happily and and jumping up and down..( As I told you before, he is crazy..He needs to be in a Mental Asylum !!..)
..and guess what ??..He gets so happy and excited that he leaves Miss 50DMA right there and goes to his first lady friend Miss 20DMA and tries to kiss her AGAIN!!
If she accepts his kiss, he gets REALLY REALLY HAPPY and WILD and really starts jumping up and down for weeks.
If she refuses, he comes back to his second lady friend Mis 50DMA again..
If Miss 50DMA (the second lady friend) also rejects him, he goes into a serious depression and just refuses to be happy till Miss 50DMA accepts him.
And so Mr.Stock lived this crazy emotional happy-sad life ever after!!!!
END OF STORY ==========
The story may be fictitious, but the emotions behind it are not. A stock just follows the wild untamed emotions of the investor crowd instead of precise mathematical logic.
One of the most important support levels for a stock is the 20 days moving average. (Which is shown as a blue line in DreamTai)
The stock price comes down and kisses the 20 day moving average for support and then bounces back again.
If the 20 days moving average rejects the stock kiss, the stock runs down to the 50 days moving average for emotional support.
(The 50 days moving average is shown by a purple line in DreamTai)
If the 50 days moving average also resists the stock and acts as a resistance, the stock goes into a bearish decline.
Now, you may ask, why 20 day moving average and 50 day moving average? Why dont we use 25 day or 35 day moving average?
That is because 20 day and 50 day is used by many investors, hedge funds and financial institutions all over the world. Many financial institutions have set automatic programmed triggers by which they would short stocks which break below 50 day moving average.
Don't just believe me. See the charts below for further proof about the existence of Stock Kisses.
Now, how can we make money with this knowledge about Stock Kisses and the emotional behaviour of stocks ?.
One of the least riskiest time to buy a stock in an uptrend is just when the stock is about to kiss or has just kissed the 20 Day moving average or 50 day moving average. At that time, we know that there will be only two outcomes..One is that the stock will rebound back after the kiss, or the other option that the moving average resists the stock advances and the stock falls furthur.
So, if you place a buy order with a stop loss sell order just a little below the moving average, you will be risking very small quantity.
Have a look at the charts. Most of the time in an uptrend, the 20 days moving average accepts the Stock Kiss and the stock jumps higher.
Look at some of your stocks and please write back if you have any questions about Stock Kisses.
