When to Buy? Two Key Criteria
In How to Find & Evaluate Stocks, we saw that company fundamentals help you with stock selection, so you know what to buy. Innovative, game-changing companies with big, accelerating earnings and sales growth are the true market leaders you want. You'll find them in IBD screens like the IBD 50 and IBD Sector Leaders.
Once you find a top-notch company, should you buy shares right away? Not so fast. For when to buy, review two key indicators:
- Market Conditions
- Stock Chart Action
Check Market Conditions
Since most stocks move in the same direction as the overall market, make new buys only during an uptrend(See Stock Market Direction). That's when your trades stand the best chance of success.
- Don't dive into stocks without first checking the market conditions. Would you go to the beach if it were freezing cold and raining? Unless you're a seal, you wouldn't. You would probably check the weather outlook days in advance and get daily updates. Apply the same common-sense approach to investing in stocks.
- Wade in when market conditions are right. You can run faster with the wind at your back than having it blow against you. In the same way, buying stocks during a market uptrend will speed you to your investment goals sooner. So always be aware of the market direction. It can be fickle like the weather. Don't get off guard. Use IBD's The Big Picture to easily understand current conditions and trade in sync with them.
TRY AN IBD HOME STUDY COURSETOLEARN THE BEST TIME TO BUY STOCKS.
Review The Stock Chart
Track the stock's chart action, and buy only when it shows strength by trending higher on above-average volume.A downturn in the major indexes tends to pull most individual stocks down with it. Therefore, it's much riskier to buy stocks during a correction, and it's critical to keep a close eye on any stocks you already own.
To get the most out of this section, be sure to first go over the basic concepts described in How to Read Stock Charts.
Unfortunately, many investors underestimate the value of stock charts. Don't let that be you.
With a little training and practice, anyone can use charts to make surgically precise trades — at the optimal price and time. And if things go wrong, the chart will indicate when to exit your position.
In the world of medicine, doctors analyze imaging to help understand an individual's health — MRIs, X-Rays, EKG, CAT scans and ultrasound. In the investing world, knowledgeable investors analyze a stock's chart action to understand its current & historical health. Buy stocks displaying robust signs of fitness, not motionless coach potatoes; or even worse, decliners with sell-ulitis.
What if you find an exceptional company that has an industry-dominating product and stellar growth, but the chart shows the stock is being sold heavily and is clearly trending lower; should you buy it anyway? No, it's heading the wrong way!
Would you catch a train going the opposite direction you want to go? Of course you wouldn't. And you shouldn't buy a stock that's trending lower. You're riding it the wrong way.
Make sure the stock is breaking out of a common chart pattern, which is often a precursor to big gains. Our research going back to the 1880s shows the same chart patterns repeat year after year.
When you buy, your stock should also be in a proper buying range, not extended more than 5% past the ideal entry point. Don't chase it. If you miss the train, make sure you catch the next one that comes along.
Every year we hear from investors who don't think stock charts have anything to offer them. It's true there is some interpretation involved, but it's not as esoteric as some think. It just takes a little study and practice. Anyone can do it.
If you want to reach the penthouse of a high-rise building, don't you scan the directional signals to decide which elevator to catch going up? If you ignore the signs and just jump into one, you may end up in the basem*nt instead of the top floor.
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FAQs
Since most stocks move in the same direction as the overall market, make new buys only during an uptrend(See Stock Market Direction). That's when your trades stand the best chance of success. Don't dive into stocks without first checking the market conditions.
When should I buy stock technical analysis? ›
Moving average crossovers are another frequently employed technical indicator. A crossover trading strategy might be to buy when the 10-period moving average crosses above the 50-period moving average. The higher a moving average number is, the more significant price movement in relation to it is considered.
How to tell when it's a good time to buy a stock? ›
The best time to buy a stock is when an investor has done their research and due diligence, and decided that the investment fits their overall strategy. With that in mind, buying a stock when it is down may be a good idea – and better than buying a stock when it is high.
Is IBD Live worth it? ›
IF you apply O'Neil's rules, remain disciplined, study, become proficient (not expert) at chart reading and what the markets are telling you, IBD will help you make a fortune. MarketSmith is phenomenal for data / charting all-in-one. IBDLive may be THE best investing show ever and a deep well of knowledge / experience.
What does IBD mean in stock market? ›
Investor's Business Daily (IBD) is an American newspaper and website covering the stock market, international business, finance and economics. Founded in 1984 by William O'Neil as a print news publication, it is owned by News Corp and is headquartered in Los Angeles, California.
Does technical analysis beat the market? ›
This means that prices reflect all available information and that it is difficult to consistently beat the market by using technical analysis or any other method. In conclusion, technical analysis is a trading discipline that seeks to evaluate securities based on their price movements and trading volumes.
How accurate is technical analysis? ›
Methods vary greatly, and different technical analysts can sometimes make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power.
What is the 3-5-7 rule in trading? ›
A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.
What is the 10 am rule in stock trading? ›
Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.
Is it a good or bad time to buy stocks right now? ›
Stock prices have surged significantly over the past 18 months. The S&P 500 is up by 45% since it bottomed out in October 2022, while the tech-heavy Nasdaq has soared by a whopping 58% in that time. Investing now, then, means paying much higher prices than you would if you'd bought a year or two ago.
The clinical response rates at 1 and 3 months were 73% (95% CI: 64–81%) and 76% (95% CI: 59–87%), and the colectomy-free rates at 1, 3, 6, and 12 months were 86, 84, 78, and 69%, respectively.
How much is IBD live per month? ›
for your first 3 months
$99.95/month thereafter. $49.95/month thereafter. Must be a subscriber of IBD Digital, Leaderboard, SwingTrader or MarketSurge. After the 3-month trial, your IBD Live subscription will auto-renew at the regular monthly rate of $49.95/month.
What is the peak age for IBD? ›
While IBD can occur at any age, disease incidence peaks in early adulthood (between 15 and 30 years) such that individuals experience a number of acute and recurrent inflammatory events that can endure for decades (12) .
How many stocks should I own IBD? ›
Individual investors with sizable accounts still shouldn't bite off more than they can . "Even investors with portfolios of more than $1 million need not own more than six or seven well-selected securities," O'Neil says. "If you're uncomfortable and nervous with only six or seven, then own 10.
Who gives the best stock advice today? ›
Let's jump in!
- Best overall: Motley Fool Stock Advisor. ...
- Best quant-driven service: Alpha Picks. ...
- Best for portfolio management: The Barbell Investor. ...
- Best for a high-caliber team of analysts: Moby. ...
- Best for disruptive technology: Motley Fool Rule Breakers. ...
- Best for long-term swing trades: Ticker Nerd.
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| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| Amazon.com (AMZN) | 1.29 | Strong Buy |
| Nvidia (NVDA) | 1.33 | Strong Buy |
| Microsoft (MSFT) | 1.33 | Strong Buy |
| Bio-Techne (TECH) | 1.39 | Strong Buy |
21 more rowsTechnical Signals
If a stock's price declines so that its 50-day moving average (MA) crosses below its long-term 200-day moving average, it might signal a change in its trend. It also could signal that the company's fundamentals have deteriorated or that economic conditions for the sector have changed.
What time frame should you use to analyze a stock? ›
The timeframe for analyzing a stock's history depends on your investment goals. Longer periods like 1-year or 5-year timeframes give a more comprehensive view of a stock's performance and can help you to understand long-term market trends and a company's viability.
How do you use technical analysis to pick stocks? ›
Technical traders usually want to identify strong, uptrending stocks for potential buys and weak downtrending stocks for shorts. One way to find them is to use moving averages, which are trend-following indicators that smooth out day-to-day price movements to show a stock's general direction over time.
What is the most accurate technical indicator for stocks? ›
The best technical indicators for day trading are the RSI, Williams Percent Range, and MACD. These measurements show overbought and oversold levels on a chart and can help predict where a price is likely to go next, based on past performance.
