Trading Lesson of the Week

• March 8, 2026
• ASNS | OLOX

In This Week’s Issue:

• Market Outlook – Oil is the Thing
• This Week’s Market Minutes video – Oil Prices Are Surging! Is a Stock Market Crash Next?
• Trader Training – The Cycle of Rapid Price Appreciation: How Traders Should Approach Momentum
• Strategy – Stocks in Play

 

Market Outlook – Oil is the Thing

Wars do not usually cause a lot of problems for North American stock markets. In many cases, they are actually good for stocks. However, so far this war is different because this war is having a dramatic effect on Oil supplies and prices. The threat of attacks on Oil tankers transiting through the Strait of Hormuz has stopped most tankers from making the trip. With storage facilities filling fast, Middle Eastern producers are now scaling back production.

While oil prices moved up in anticipation of the war with Iran, the effect of the war on oil supply has exceeded expectations. That is why we have Oil over $100 and stock markets suffering over the past week.

This is a market moved by headlines which makes it a bit difficult to predict. That uncertainty is another factor keeping many investors sitting on their hands. Oil stocks have not really kept up with the increased price of Oil, probably because investors see this as a short-term effect on prices that could change very quickly.

In this environment, you have to be patient and fussy. There are strong short term moves in stocks every day. They are characterized by abnormal price movement with abnormal volume and can be lucrative for traders who recognize them early and take their profits before they collapse.

 

This Week’s Market Minutes Video – Oil Prices Are Surging! Is a Stock Market Crash Next?

Rising oil prices and war with Iran have many concerned that a stock market crash is next. This week, I look at whether rapidly rising oil prices cause stock market crashes and what the outlook is for the stock market. Then, I provide my analysis of the stock, commodity, currency and bond markets and look at the trade of the week on EDSA.

Click Here to Watch on YouTube

https://youtu.be/QldbjfXrnF4

 

Commentary – The Cycle of Rapid Price Appreciation

Long-term investors and short-term traders approach the stock market in very different ways.

Investors focus on owning great businesses. They analyze financial statements, competitive advantages, and long-term growth prospects. When they find a strong company, their goal is simple: buy the stock and hold it while the business grows.

Traders, however, operate differently.

Short-term traders are not primarily concerned with the long-term quality of the company. Instead, they focus on situations where demand for a stock exceeds supply, because that imbalance is what drives prices higher in the short term.

When demand overwhelms supply, stocks can enter periods of rapid price appreciation. These moves tend to follow a recognizable cycle. Understanding the phases of this cycle can help traders identify high-probability opportunities while avoiding the most dangerous entries.

Below are the key phases every momentum trader should understand.

 

1. The Breakout

Every major price move begins somewhere.

Often, the best opportunities start with a breakout from a period of low volatility. During these periods, price trades in a relatively tight range while supply and demand remain balanced.

Eventually, something changes. New buyers enter the market and demand suddenly overwhelms supply. This shift shows up on the chart as an abnormal move in both price and volume.

These breakout moves can be powerful buying opportunities.

However, the challenge is finding them early enough. Breakouts often happen quickly, and traders who are prepared with scanning tools and clear trading strategies have the best chance of participating.

 

2. The Pullback

Stocks rarely move straight up.

As price rises following a breakout, early buyers will often take profits, causing the stock to temporarily pull back. This pullback typically occurs toward an upward trend line, which reflects the underlying strength of the trend.

For disciplined traders, this phase can provide an excellent opportunity.

Instead of chasing price higher, traders can wait for the pullback to stabilize and then enter on a break of the pullback, signaling that buyers are once again taking control.

A key principle here is simple:

Focus on stocks that are already trending higher, and wait patiently for pullback breakouts.

This approach allows traders to enter strong stocks without paying the inflated prices that often occur during emotional buying surges.

 

3. The FOMO Spike

As a trend progresses, more traders begin to notice the move.

Eventually, the crowd arrives.

This phase is often driven by FOMO — the Fear of Missing Out. Traders see the stock rising and rush in to participate before the move is “too late.”

This late buying can cause price to spike sharply upward, often moving far away from the established trend line.

Ironically, this is often the most dangerous place to buy.

The farther price stretches above its trend line, the more vulnerable it becomes to a pullback. Traders entering during the FOMO phase are often buying just before the next correction begins.

In short:

The further price runs from its trend line, the greater the risk of a pullback.

 

4. The Trend Break

Eventually, every trend changes.

During strong trends, pullbacks repeatedly stop at the upward trend line before the stock moves higher again. But when that trend line is finally broken, the character of the move changes.

This moment marks the transition from the front side of the trend to the back side of the trend.

On the front side, buyers control the market and prices tend to make higher highs. On the back side, the balance of power begins to shift.

Once the trend line is broken, buying becomes riskier and the potential upside diminishes. The previous high of the trend often acts as resistance, limiting how far the stock can rise.

This is a point where many traders should begin shifting their mindset from buying to protecting profits or stepping aside.

 

5. Trend Renewal

Sometimes, however, the story does not end with the trend break.

If a stock that has moved onto the backside of its trend is able to break above its previous highs, something important happens.

The trend effectively resets.

By moving to new highs, the stock demonstrates that buyers have regained control and demand once again exceeds supply.

When this occurs, the entire cycle begins again:

1. Breakout
2. Pullbacks and continuation moves
3. FOMO spikes
4. Trend breaks

Recognizing when a trend is renewing can provide traders with fresh opportunities in stocks that have already demonstrated strong demand.

 

The Key Lesson for Traders

Investors buy good companies.

Traders buy good situations.

The best trading opportunities occur when demand clearly exceeds supply, creating the conditions for rapid price appreciation.

By understanding the phases of the momentum cycle — breakout, pullback, FOMO spike, trend break, and trend renewal — traders can position themselves to participate in the strongest moves while avoiding the emotional traps that often catch late participants.

In trading, timing matters.

Understanding where a stock sits within this cycle can make the difference between buying strength early… or chasing it too late.

 

Learn more about how to invest and trade in the stock market with the Stockscores Approach with these free April live classes. Click here for more information.