Tramondo Investment Partners AG – Unter Altstadt 10 – Postfach CH-6302 Zug

The Stock Price Maturation Cycle

What is happening to high-growth/leading stocks and its “poster child” $ARKK (Chart 3), and why?

In a nutshell, as Mark Twain famously said: “history does not repeat but it often rhymes”.

Stock prices of high growth/leading stocks tend to follow what is called a “stock price maturation cycle” – in other words, there are four stages of a stock’s life (Chart 1):

 


 

Stage 1: Basing Area (Consolidation)
Stage 2: Advancing Phase (Accumulation)
Stage 3: Top Area (Distribution)
Stage 4: Declining Phase (Capitulation)

Source: Stan Weinstein’s – Secrets for Profiting in Bull and Bear Markets

 


 

In addition, leading stocks in a bull market exhibit typical cycle dynamics consisting of a period of significant out- and underperformance (Chart 2).

If we look at the chart patterns of most high-growth/leading stocks since March 2020, many of them are already in Stage 4, having risen significantly in recent months and subsequently topped out.

At Tramondo, monitoring the behavior of leading stocks is crucial to our hedging framework and belongs to our third pillar (out of four) “market internals”.

Chart 2: Tencent (TCEHY US) – 5-Month Base Consolidation
Chart 3: $ARKK
Share this post
Share on facebook
Share on linkedin
Share on twitter
Share on email

About Tramondo

Tramondo Investment Partners AG is a bank-independent Swiss asset manager based in Zug and licensed by the Swiss Financial Market Supervisory Authority (FINMA) to act as an asset manager of collective investment schemes. The firm is a signatory of the UN’s Principles for Responsible Investment (PRI).

Contact

Tramondo Investment Partners AG

Unter Altstadt 10
Postfach CH-6302 Zug

+41 41 710 76 76
info@tramondo.ch

© 2020, Tramondo Investment Partners AG. All rights reserved.

No data was found

Please fill in the form below and press the ‘Send’ button. We will contact you shortly.

Please contact me without obligation regarding the following service(s)