Be careful not to chase stocks in this current market environment. Thursday morning it appeared those who were previously bearish in September are now afraid of getting left behind and are buying many of the leading stocks at any price.

 

Please remember that buying right, at a proper buy point will keep you out of approximately 85% of the potential problems that you might incur. Therefore, never buy a stock 5% beyond it’s pivot point and always evaluate the average cost of every stock you are considering adding to. That way, if and when the stock pulls back, you still have a profit cushion which keeps you from being shaken out early.

 

If you feel like you’ve missed an opportunity to buy a leader right, resist the temptation to chase. In my experience, you almost always get another opportunity a few weeks later when the stock consolidates its gains or pulls back to its 50-day moving average line. (see the AMZN example above). Now that the market volatility has subsided, and the market has turned in our favor, keep a disciplined and objective approach as there are many promising stocks and groups in this broad based rally.

 

Best Returns,

 

Scott O’Neil, President, MarketSmith, Incorporated