I am confused
Hi Marty,
I know Charts are very important and buys should be made on Pivotal moments. My question or confusion is that some stocks like we have high conviction, and we are happy to hold, how active should be on those. For example GOOGL. Amazing stock, cheap.
I understand for momentum stocks, chasing the best add opportunities and having stops being in place make lots of differences. But for core holdings, should we still have that same mindset. Normally I am doing is holding GOOGL, META, MSFT as my majority holding and adding on when market gives opportunity.
But swing trade ideas, like KTOS, OUST trying to buy on breakouts, add on mean reversions.
Another question which kind of confuses me, for momentum stocks, we only buy when they are higher than current prices. (for example price of stock is 102, buy point is 106) This confuses me a lot, why would i expect it to be higher to buy. Why not buy when cheaper?
Mack,
Great questions!
There is nothing wrong with holding GOOGL META MSFT for your long term accounts. They are great companies that will continue to do well. But, they are not the types of stocks that are going to double triple or even greater like some of the smaller stocks. Those companies are way too large to grow quickly. For example, Robinhood advanced 242% from April 7 to July 18. You will NEVER get that type of alpha form the megacap tech stocks. This is a swing trading site seeing big returns. Once again, there is NOTING WRONG with holding GOOGL MSFT and META. It is just not the prototype for swing traders seeking a 2-bagger to 10-bagger.
In reference to a buy point at $106 and buying at $102, I am not sure what stock you are referring to. However, I will say that a higher price is likely to be above a pivot point where it will attract more buyers. The higher the price, the stock becomes more attractive for institutions. The lower the price it has not "proven" itself above. certain level.
Take Rubrik for example... It was trading below at $86.31-$93.14 and closed below its 50sma on Tuesday, and there are many programs that will not buy stocks below that key technical level. Yesterday the stock closed above its 50sma, and I put in on our ready list. Yes, we are paying higher prices. But, the fact that it is above a key technical level attracts more buyers. It could have been rejected at that level, and you would be regretting buying that stock on Tuesday. In retrospect, it is easy to say "just buy at lower prices." But, the higher prices attract the institutions which are mostly run by algorhythyms. We want to be on the side of the institutions and make sure they are buying our stocks. I hope this makes sense.
Buying stocks at lower prices can be beneficial sometimes. But, mostly stocks are trading lower for a reason.
Regards,
Marty