Buying at the right time pays off! Several articles on this site have already elaborated on how to find a company that is fundamentally sound. Once you have a short list of those, buying shares of them at the right time based on volume and price information is crucial. On top, patience pays off…
Here is concrete example. Let’s look at ValueClick Inc, symbol VCLK. Valueclick provides online marketing services for about 6000 advertisers, ad agencies and direct marketers. The fundamentals of VCLK looked great: EPS 98, accumulation/distribution B-, EPS growth 94%, change in EPS in last quarter 100% and change in Sales 138%.
Looking at a chart of VCLK you notice that it had quite a run from 6/24/05 till 1/13/06 and then from 8/04/06 till 12/08/06. However since December VCLK was going thru a correction.
The first buy point came on 01/16 at 24.73 (I use the close prices of that date rather than some intra-day price). The second buy came at 01/23 at 25.34. And you still could have gotten in on 02/15 at 27.15.
If on the first buy you bought 1000 shares, on the second one 750 and on the third one 500 – note the decreasing level of shares, which was advocate in previous articles – then today when the price shot up again, you would have about $7,557 in profits on a total investment of just over $57,000. That comes down to 13% in about a month!
Study the chart and watch in particular how volume changes are providing the clues to get in. If you are not sure why you can always go back to my article on Reading charts upside down.
Timing your entries (and exits which I will discuss later) and patience is crucial to make decent returns in the markets.
The more you study charts the easier it becomes, because the key is dancing with the music the market is playing!
Source: Reuters.
As an exercise you may want to take the IBD 100 list of stocks, sort the list based on the percentage from recent high in descending order (you can get this from downloading the table from the web into an Excel spreadsheet). Then for each of the stocks that are less than 5% away from a recent high print out a chart and determine which one have still to reach a buy point; and which have already passed a buy point. Keep those charts handy and when any of the buy points materialize (based on volume and price action) don’t hesitate to buy.
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