Not every chart needs a trade. Sometimes the job is simply to identify where the risk/reward starts becoming interesting. While screening for potential shorting opportunities, I came across this setup. The idea was to combine market structure + liquidity + imbalance + trend rather than short simply because price was falling. ๐ What caught my attention? 1️⃣ Bearish structure Price had already experienced a strong decline and was trading below a downward-sloping moving average. That suggested that the broader momentum was still favouring sellers. 2️⃣ Equal High = liquidity above The Equal High marked on the chart is an area I would watch closely. Rather than assuming resistance will hold, I look at clustered highs as a potential area of buy-side liquidity. A move toward or through that area can become important when assessing a potential reversal. 3️⃣ IFVG — potential resistance The purple Inverse Fair Value Gap (IFVG) becomes the key area I'm watching. If price retraces into this z...
At Berkshire’s 1996 annual meeting, Charlie Munger pointed out that he had never seen Warren Buffett actually do a DCF.
Buffett’s response was revealing:
If you have to do the calculation with pencil and paper to determine whether an investment works, it may be too close to think about.
๐๐ปThe lesson isn’t to ignore valuation.
It’s to look for opportunities where the economics, price and margin of safety are compelling enough to be obvious.
Use the DCF to test your thesis - not manufacture conviction.
If the investment only works because of heroic assumptions, move on.
Source ๐๐ป
Buffett and Munger Unscripted
1996 Berkshire Hathaway Annual Meeting.