Buy Points

Hi Marty,

Are you able to elaborate on how you determine buy points?

I have access to market smith and i notice your buy points are sometimes lower than the pivot point identified by market smith.

Example: AMAT- you've stated buy point at $142.12, marketsmith has pivot point of $146.

Thanks a lot

That is a good question, and I have had this discussion often with folks who have worked for Marketsmith pattern recognition.

The Marketsmith pattern recognition typically has a "standard buy point" at 10 cents above a new high.  Everybody knows this to be true including fund managers who may want to sell some stock and they wait for the new high to sell into the strength of retail buyers.

There are no absolutes and this does not happen all the time. The standard buy point can be an effective target as evidenced by the ZIM chart where it broke out from a standard buy point. The thought process behind a "standard buy point" is there is no overhead supply to act as resistance.

Here are a few charts of failed breakouts where the standard buy point was met with aggressive selling last week in SBLK and CPRT.Therefore, I like to buy early (early entry buy point) where it is not the high, but there is not a ton of overhead supply either.  We did this with AMD before its most recent earnings report. Of course, I bought early and got shaken out and had to buy it back. But, the point is there was little overhead supply to act as resistance.

There are many strategies for buy point such as the break out a downtrend line, or the undercut and rally as we saw with CRWD and GNRC recently.The standard buy point has been proven to be useful over the course of many years. However, there are no absolutes in this business, and it is more art than science. We need to  have a "feel" for a stocks price action. I change buy points based on my experience and intuition and not what a computer generated program tells me.

I hope this answers your question.

Regards,

Marty