What is conviction?
Conviction from a trader's/investor's standpoint is the ability to hold a stock with courage and unwavering resolution.
"Know what you own, and know why you own it."
- Peter Lynch
How to develop conviction
- When analyzing a new company, ask yourself, "Is the company changing the way we work, live and play?"
- Does the company have a large potential customer base? (TAM)
- Can the company address a very large geographical market? Can it cross into different cultural/global markets?
- Is there a high risk that the company's products/services can become obsolete?
Using NFLX, AAPL stocks to explain how to hold in long term, go through monthly chart.
NFLX went up from $27/share in 2010 to $980/ share in 2025
Technical indicators to use
The 10-week Simple Moving average (SMA) Line
- Institutional support
- Historically, instituions (e.g. mutural funds and hedge funds) will buy/support a stock at the 10-week moving average line
- Directin of the scope
- The slope of the 10-week line can indicate momentum. A risking 10-week line suggests increasing momentum in an uptrend, while a falling SMA suggests decreasing momentum in a downtrend
- Sell signal
- We use the 10-week line as a sell signal when a stock closes below the 10-week line above-average volume
PANW stock as an example
The 10-Month Simple Moving average (SMA) Line
- Clearer Long-Term Interpretation
- The 10-month duration provides a long-term perspective, filtering out short-term market noise and making it easier to identify the underlying trend
- This is particularly useful for investors who are interested in medium- to long-term trends rather than short-term fluctuations
- Reduced False Signals
- Since it only generates a new data point once a month, the 10-month moving average removes a lot of the head fakes and false signals that shorter-term moving averages might produce
- This makes it more reliable for generating fewer (but more significant) trading signals
- Support and Resistance Levels
- The 10-month moving average can act as a strong support or resistance level
- When a stock's price is above the 10-month moving average, it can indicate a bullish trend, and when below, it can suggest a bearish trend
- This makes it a useful tool for setting stop-loss levels and determining entry and exit points
My practics
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