How do I time my entry point?

Facebooktwittergoogle_plusredditmail

After identifying a good stock and calculate the intrinsic value, the next important step is to develop a trading plan or investment plan of when to buy and when to sell. The first thing before I enter the position is to look for excuse for not to buy because it is easier to identify the not to buy signals.

When Not to Buy?

  • When the stock in on the down trend. I check whether the stock price is below 20D, 50D and 200D MA line. I do not want to buy a stock which may go lower and lower. I also use other Technical Indicators (MA, MACD, Parabolic Stop and Reversal, Bollinger Band, RSI, Stochastic) to confirm my analysis. Below is stock chart for S&P500, I show some Technical Indicators (MA, MACD and Bollinger Band) only on the charts otherwise the charts will be overcrowded when I include all six Technical Indicators. 
  • When the stock breaks below a strong support line.
  • If there is no clear support line on the chart, I will use Fibonacci retracement to identify the support level. 61.8% Fibonacci retracement level is a critical support or resistance level that I will pay special attention to.
  • When there are reversal patterns shown on the chart like Head & Shoulders, Double tops, Triple Tops.

     

  • When the stock price are testing the resistance or on top of the resistance of a channel.

     

When to Buy?

 

  • When the stock is on an up trend. The stock is above 20D, 50D & 200D MA, and all technical indicators show bullish convergence.
  • When the stock price breaks the resistance with high volume.

     

  • When the stock price breaks out from the consolidation.

     

  • When the stock price retraces back close to the support line on an uptrend channel. I buy on the dip.

     

There are still lot more patterns I need to learn to perfect my entry points. I will continue to share in my stock chart analysis.
Facebooktwittergoogle_plusredditmail

2 thoughts on “How do I time my entry point?

  1. Hi. I looked through your blog and found it very interesting. I am a 23 year old undergrad and I am looking to invest. if you would, would you care to mentor me as i make my first investments?

    thanks

Leave a Comment