The following Toyota daily chart (very busy - I'm sorry) illustrates how I choose my entry point when buying a stock.
Essentially, I want to buy a stock when it is breaking out of a properly formed basing pattern, in other words, a period of consolidation. I look for better than average volume on the breakout. This tells me that the institutions are bidding up the stock. I want to own a stock that has caught the fancy of the big boys. They are the only ones that have the true power to move a stock higher.
I have drawn boxes around consolidation periods. Notice the stairstep quality of the moves. My buy point (also called a pivot point) is clearly defined. I buy when the share price enters the Buy Zone, the blue shaded area. If the breakout fails, I sell it when the price enters the Sell Zone, the pink shaded area.
(click on chart for easier viewing)
Toyota Motor Company
Buy Trigger Analysis
GWM Model Holdings
04/11/2013
8:30 am
Toyota symbol = TM
04/11/2013
8:30 am
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