Stock Worth Investing In
How do you pick a stock worth investing in? Once you have the criteria for a stock worth investing in how do you find stocks that qualify? Once you have a portfolio of stocks how do you decide when a stock worth investing in no longer qualifies?
In looking for stock worth investing in it is important to decide if stock appreciation is more important to you or whether you prefer dividend paying stocks. If you are in your high earning years you probably want stock appreciation and if you are retired you will want steady payment of dividends. If you have stock that has appreciated over the years it may be better to sell and pay taxes on the capital gains when you are not earning as much.
Stock volatility is another matter in deciding about stock worth investing in. When you are younger and have lots time and earning years in front of you, investing in stocks with a possibility of great appreciation but also the possibility of lots of volatility is reasonable as the stock may have time to recover after a drop in value and you may have time to earn back money lost due stock volatility. This is not a situation you would want in retirement when steady income and preservation of capital are most important.
If are just starting out, talking to a stock broker may help you decide about stock worth investing in. After you have more experience you will be able to do your own market analysis, anticipate stock trends, and understand stock market risk.
Balancing risk and reward potential is important in deciding about stock worth investing in. More risk can go with a potential for higher reward. Investing in a set of start up companies with growth potential may be rewarding and it may also result in loss of capital.
Once you have picked a set of criteria for stock worth investing in you can get stock advice from a broker or you can go online and select possible stocks by entering your criteria in a search program. You will get a list generally matching your criteria. Then you can pick a stock to invest in.
Here is where market timing may come in, depending upon how volatile your stock is. Some stocks follow cyclical patterns throughout the year and most respond to economic conditions or market conditions. Anticipating when a stock is at or near its low point in a cycle will be more profitable than buying at market price without regard to where the stock is in its cycle.
Likewise, in getting out of a stock position, meaning selling the stock, it is better for your portfolio value to time your exit.
Diversification is important. If all of your stocks are in the same market sectors, such as the telecommunications sector or oil companies sector, you have more risk of substantial losses than if you have a balanced portfolio with stocks in several different market sectors.
Market Direction: Candlestick patterns have expected results. The anticipation of those results, and the knowledge of how the pattern is formed, allows an investor to accurately position a portfolio. Recently, the Dumpling Top pattern had been forming in the Dow. Developing a strategy becomes relatively easy when knowing what makes up a Dumpling Top pattern. The past three days of trading showed good strength in the Dow while the NASDAQ was trading sideways. The Dow tested the .Dumpling Top curvature on Friday. That made today's trading strategy relatively simple. If the Dow started showing resistance at the Friday's close area, that would be additional confirmation the Dumpling Top resistance was still in progress. It was time to close out long positions and possibly add short positions.
If today's trading revealed continued strength, the analysis of the Dumpling Top pattern would now become diminished. As seen in today's trading, the Dow changed the trajectory of a rounding top. At the same time, the NASDAQ traded above the recent highs, indicating the sideways action of that index might now be broken. Now new expectations come into the picture. The NASDAQ may be breaking out into new recent highs. The Dow could be starting a wave three. Instead of closing out long positions today, an investor should now be more inclined to adding to the long positioning of their portfolio.
Candlestick analysis is not difficult to process. It takes the commonsense logic of price movement and provides high probability results expectations. Now that the trend has lost a good portion of the downside probabilities, the investing strategy continues to apply candlestick patterns. Today's recommendation of AFFX was instigated by understanding that if there is not a severe change in investor sentiment. The longer the time frame there does not appear to be in the major change of investor sentiment, the better opportunities for price patterns have to produce large profits. AFFX was recommended because of a Fry pan bottom pattern. The same was true for our recommendation on MNKD a few weeks back.
It is very important to know which direction the overall market is moving. Prices moving positive in individual stocks do not necessarily require the market in general to be moving in a bullish manner. However, the probabilities are obviously much greater when a bullish chart pattern is identified and the market is moving in the right direction. The correct trend analysis can be produced with the same information built into candlestick formations. This information can magnify profitability when applied to option trading as well as commodity trading.
No members' chat session tonight.
The Candlestick Forum Team