Locating the best time to buy stock can significantly improve investing success
Taking advantage of the best timing to buy stock can make a huge difference in the success or failure of the trade – and the growth of your portfolio.
Take the time to review the stocks price chart before you buy stocks.
Watch for the 3 most profitable investing chart patterns to buy stocks at just the right time.
Here are the three most profitable chart patterns:
- Low points – or “pivot” points – in a rising price trend
- Price breakouts above the resistance level of a base
- Confirmation of a new uptrend
Read how to take advantage of these patterns to buy stocks at very profitable price levels.
1 – Buy stocks at low points in a rising price trend
The profitable investing watchlist is updated weekly and contains 100 of the highest quality companies that have technically strong price patterns.
Each company passes stringent stock screening criteria to be on the list.
Because the watchlist always contains superior companies, it is common to find many of them in strong price uptrends.
A price uptrend is identified when the price of the stock is making higher lows and higher highs when the stock price is plotted on a standard stock chart.
An upper trend line and a lower trend line is then drawn on the price chart.
The upper trend line is drawn across the extent of the price moves at the high point.
The lower trend line is drawn across the natural pullback lows in prices.
The strength of the trendline is denoted by the number of highs and lows that touch the trendlines.
As shown on the image above, the best time to buy stocks in an uptrend is when the stock price returns to near the lower trend-line.
2 – Buy stocks on price breakouts above the resistance level of a base
Occasionally a stock in an uptrend will “stall” or be prevented from moving up further at a definable price level.
This price level is referred to as an overhead resistance.
An overhead resistance area can frequently be identified by looking at the stocks action around that price level in the past.
It is a price level that brings out more sellers just because the stock is now trading around that price.
Several situations bring out sellers at a price level:
- Holders of stock that purchased at a higher price and are now looking to sell to recoup losses or get out even
- An area of base building that created that price level as a floor, or support level
- Round price levels like 100’s, or prices ending in zeros or fives)
- Prices or price ranges that are popularized in the media
No matter what the cause, any overhead resistance can be connected with a straight line across the recent highs.
Once the stocks price is able to break through that resistance level prices can move upwards quickly.
It is fairly common to see prices move upwards quickly once above the overhead resistance. The reason for quick price up-moves is because many of the sellers at that price level have left the market.
3 – Confirmation of a new uptrend when bottom-fishing to buy stock
Many investors enjoy bottom-fishing for stocks.
The bottom-fishing approach attempts to purchase stocks as downtrends end and a new uptrend is starting.
The biggest problem with this approach is that many investors buy stock too early without waiting for the downtrend to end.
So in many cases the stock does what is has been doing and continues to go down.
Lower prices tend to continue until it’s clear that the trend has reversed.
This works both ways, downtrends changing to uptrends, and uptrends changing to downtrends.
Because this explanation is a discussion about new uptrends let’s walk through the image and explain how this typically happens.
- The left side of the image shows a stock in a typical downtrend. Downtrends are identified by lower low prices and lower high prices.
- The situation improves – maybe the market gets better, or profits increase, or the CEO quits, etc.
- At point A the price starts moving back up before it moves lower than the prior pivot point. This is a first higher low. A good sign that a new trend might be starting but it’s still to early to tell.
- At point B the stock price has moved up higher than the prior high. A second indication that the trend has changed.
- At point C the stock price creates a second higher high. This is a good indication that a new uptrend has started. Aggressive investors might start buying at this price.
- At point D a pullback to a now confirmed lower trendline has occurred. A trendline needs at least two price “touches” before it can be created
- Point D is the safest buy point of a stock exhibiting a new uptrend.
Remember the next time you are in a position to buy stock…..
- Take a few moments to review the companies on the stock watchlist
- Review the stockchart and identify if the stock is in an uptrend, building a base, or changing trends
- Watch for the right pivot points to show up before buying the stock.
Waiting for the right pivot point, and the market to come to you is a sure way to profitable investing results.