When to Buy Stocks

Source: http://www.investors.com/ibd-university/how-to-buy/when-to-buy/

When we start our journey in the stock market, the most common problem that we will encounter would be on what stock/s to buy. We usually see this question in trading groups or forums and the usual answers would be blue chips and mutual funds. However, once you've found the stock to buy, don't buy right away. Why? Because the market is a like a roller coaster, up and down, up and down. Remember: Buy Low, Sell High so when are we going to buy then. 

There are two indicators you need to review before buying a stock whether its a blue chip or a small-medium cap stock:
  1. Check Market Condition  
    • You have to know whether the market is bull (up) or bear (down). 
    • Make new buys when the market is an uptrend (BOBO - buy on breakout but you need to have a good base. Check Pyramiding Strategy)
    • If you don't have a base, wait for corrections or pullbacks before buying. How? Review the stock chart.
  2. Review the Stock Chart
    • Track the stock's chart action.
    • Don't underestimate the value of stock charts so just know how to read the basics
    • It will help on entry prices and exit prices (support and resistance)
** When you buy, your stock should be in a proper buying range, not more than 5% past the ideal entry point meaning it should be within the support prices. Don't chase it or buy at resistance.

Own experience: Since I am also a newbie and just started last year, this is true especially on chasing the prices. Don't ever jump into the bandwagon without having a plan on when to jump out. It will really burn you. An example would be MER (blue chip). Prices fell as P250 and went as high as P300. 

If you look at the one year chart, there are gaps and it isn't filled yet so assumption would be - it would fill this gap. Supports are from P254-P261 and resistances are P277-P268. Last traded price of MER as of writing 7/8/17 is P266.6 (near resistance). If you have no base and plan on accumulating MER at a target price of P300++ (52wk high P327), you have to wait near support lines and make a trading plan like how much shares or money will you be playing on this stock then do pyramiding. (Depends also how long will you be holding this stock) If it breaks resistance price of P268, check the volume, who accumulated, candle before buying. Once confirmed it's a breakout, you can test buy at 10% first then pyramid.

Check: Overview of Bases. It's a good indicator also on when to buy stocks.

*If you want to read more about stock trading tips and strategies, I highly recommend the site http://www.investors.com. Most of my writings are based from there but I translated it based on my understanding with an example using PH stocks.

*For charting tools, I highly recommend Investagrams. You can also check their blog for more references on stock market basics. You can also practice trading virtually with them for better understanding.

#Happy Investing Kabayan!! Good Luck!!


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