Here’s What “March Madness” Means for Your Money

We’ve just passed through the best sports weekend of the year – Yes, March Madness has once again worked its magic with upsets and Cinderella stories capturing sports fans’ imaginations once again.

By many metrics (other than D.R.’s level of excitement), the NCAA Men’s Basketball tournament is one of the biggest events in sport. March Madness makes more ad revenue than the NFL playoffs (including the Super Bowl).

Thursday starts the next round of play by teams that have made the “Sweet Sixteen” – the final 16 teams play in a tournament that started with 68.

But this past weekend, one of the great David vs. Goliath stories unfolded when the practically unknown University of Maryland Baltimore County Retrievers knocked off the overall #1 seed University of Virginia Cavaliers in the very first round. 

It was not only the biggest upset in the history of the NCAA basketball tournament; it was truly one of the biggest upsets in all of sports.

This wasn’t a “hang tough during the game and sink a buzzer beater to win” type of game.  It was a complete dismantling – a 20 point crushing of a team deemed to be the best in the land at the start of the tournament.

The Retrievers lost a hard fought contest to Kansas State in the next round of play, but two Cinderella teams have made it to the “Sweet Sixteen” – the final 16 teams to play in a tournament that started with 68.

The feisty Jesuits from Loyola of Chicago were seeded 11th out of 16 in their region but have used balanced scoring and solid defense to upset two higher seeded opponents.  And the Syracuse Orange came from that same 11th seed in a different region using smothering defense to also make the Sweet Sixteen

But besides the great triumph of human spirit exemplified by these underdog wins and this tournament, why talk about it in a trading and investing article?

It’s because this most improbable of victories happened when the “little guys” figured out the tendencies of the “big bad #1 seed” and used it to their advantage – over and over again.

And that’s what individual traders and investors do – we identify price tendencies and use that edge to make profitable trades.  So let’s look at how some chart formations are guiding my current thought process.

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