Would you buy this stock? The stock above is in an uptrend. The price has fallen back to its supporting trend line. There is a momentum oscillator displayed above the stock price, it is also sitting on support. The price has pulled back 10.5%. It seems like a good opportunity. What do you think?
Would you buy this stock? Not enough information? No fundamentals, no volume?
What if I told you that this stock was in a growth industry and that volumes were very supportive, liquidity was high. Still not enough?
What if I told you the recent stock price falls were because of an uncertain event affecting the company, no one was really sure how it would play out, so to be careful a lot of people took their money out. However when you looked at the chart above, it didn't look so bad and in fact it could be a good time to buy.
What if I told you that in 1998, after a massive rally, the stock had risen 4 times.
Its value rose from 500 to 2000 in 8 years.
The stock then fell 25% from $2000 to $1500, it then rallied up in 18 months to $4500, three times the value from the pullback low.
Would you now buy this stock?
What it I told you this stock now, in the last eight years has gone up just over 3 times its value from 3000 to 9500.
Now it's had a 10.5% pullback, will you buy it now? Will you buy the stock if it falls another 15% like it did in 1998?
Do you know what the stock is?
Well it isn't a stock, well it is sort of, it is the Nasdaq.
The pullback low is around 8500, will it now go up 3 times in the next 18 months to 25,500? Like it did between 1998 and 2000?
Am I crazy? That suggestion is impossible. Maybe, but we all know the market can do anything, up or down. It's what makes trading so terrifying , or exciting and challenging, it depends on your perspective.
Rather than repeat myself here I have posted extra charts and comments about the markets on the 52 week high alerts page.