Is it good or bad for stocks to fall and shrink?

Mondo Finance Updated on 2024-02-01

Drawdowns can be seen as a good or bad signal, depending on the situation and stock selection method. When choosing, some investors will use fundamentals as their primary indicator, while others will use technical as their primary indicator.

For investors who are fundamental stock pickers, they pay more attention to the company's fundamental data, such as financial health, performance and market outlook. These investors often believe that the shrinkage may mean that the market is not optimistic about the company's prospects and that there is an investment risk. Therefore, they may see the shrinkage as a bad sign and avoid buying it.

For investors who pick stocks from technical sources, they pay more attention to the charts of the volume and volume movements. They generally believe that the shrinkage could mean a change in the balance of power between the long and short sides, i.e. a weakening of the bears' power or an increase in buying interest. In this case, there is a chance that the bottom will be reached, creating an opportunity. Therefore, they may see the shrinkage as a good signal and keep a close eye on the further trend of the ***.

Here are some examples for different situations to illustrate the possibility of whether the shrinkage is good or bad.

1.*Volume on the way: In the process of ***, if the volume is amplified, it means that there are more sell orders or short forces to participate in the transaction. This is often seen as a bad sign, suggesting that the market is pessimistic about the ** and may go further**.

2.*There is a large amount of funds after the increase on the way**: In the process of ***, if a large amount of funds appear after the volume is amplified, it may mean that some institutions or investors are optimistic about the bottom of the ** and think that the stock price has bottomed out and is more likely to rise. This is seen as a good sign that there may be a possibility of **.

3.*Shrink and increase volume at the bottom: In the process of ***, if the volume continues to shrink and a large volume trend is formed at the bottom, this is usually regarded as a good signal, suggesting that the market sentiment is gradually improving, and there may be ** or bottom formation.

It is important to note that the above are just some examples and do not represent all cases, as the market is very complex and volatile. When making ** investment, it is recommended that investors combine other indicators and analysis methods to comprehensively judge the best trading timing, and pay close attention to market dynamics and changes in the company's fundamentals. Finance

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