June 02, 2022

Properly Identifying Market Conditions with JC Parets, Ep #115

24 minutes

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JC Parets is the founder of All Star Charts and is one of the most widely followed Technical Analysts in the world. All Star Charts is a research platform for both professional and retail investors covering US and International stocks, interest rates, commodities, forex and crypto markets. In 2008, JC earned his Chartered Market Technician designation (CMT). You will often see JC as a speaker at some of the top investing conferences and has also been invited to speak at Harvard, Duke, NYU, University of Chicago and Hong Kong Baptist University among other institutions about Technical Analysis and Behavioral Finance. JC specializes in finding the most opportunistic risk vs reward propositions, while at the same time, bringing a top/down approach to the marketplace whose wide spectrum is rivaled by few. When he is not looking at Charts, JC enjoys playing and watching sports, good food and good wine. You can find JC on Twitter or perhaps at his winery in Napa Valley, CA, where he is currently producing Cabernet Sauvignon. In this episode of How To Trade It, JC shares how he chooses specific strategies based on the current market conditions. You don’t want to miss it!

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You’ll want to hear this episode if you are interested in…

[03:12] The draw toward technical analysis
[07:00] We must answer this one question
[10:08] Mean reversion
[12:20] A time and a place for everything
[13:24] Lessons learned
[14:50] Identifying trends
[18:15] Learning the hard way

Technical Analysis
The technical side has always made more sense, to JC, than the fundamentals. The markets aren’t just random, they trend…and there’s data to back that up. Beyond that, there’s a little thing called common sense. Essentially, technical analysis is looking for trends. By ignoring them, you are putting yourself at a massive disadvantage. By identifying the trends of all asset classes, we are able to put the pieces of the puzzle together to identify profit-making opportunities, regardless of the market environment.

What direction is the market going?
If you can answer this one question, you are off to a great start. People talk about the market being “overbought”, but how can an overwhelming amount of buying pressure be a bad thing?! We look at overbought or oversold conditions using an oscillator called RSI (relative strength index). It shows momentum, relative to itself, over time. In overbought conditions, you are going to see RSI readings above 70. What you won’t see are oversold readings. Momentum simply doesn’t get oversold. Ultimately, I look at overbought conditions, not as a bearish indicator, but as confirmation that prices are trending higher.

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