AKITA Drilling Ltd T.AKT.A

A good read.Buy on weakness

[lifeisgood1010]

Not on strenght.

Just came across a good article on emotional investing.

Stocks do not go straight up but investors love to chase stocks that try. This chasing of strength, buying when emotion pushes us to make a bad decision, is what causes many investors to lose on their ride of the emotional stock market roller coaster. There is a way to take advantage of the ups and downs, but it requires some reprogramming of our normal human tendencies.

If you are going to buy strength, do so after a period of weakness. Do not chase stocks as they go higher but wait for the inevitable pullback as way to get accumulate good stocks when they are on sale.

To do this, first focus on stocks that are in longer term upward trends. This is easy to spot when you look at a 1-year, daily chart. If the bottoms are going up from right to left, the stock is in an upward trend.

Next, look for stocks that have this long-term optimism but have been suffering from lower prices in a shorter term downward trend. These pullbacks in upward trends are a normal occurrence, driven by investor’s desires to take profits after a run up. It is the metaphoric release of air from the hot balloon that was blown up by irrational investor action. These pullbacks create opportunity.

Stocks that are in upward trends typically have improving company fundamentals, or at least that is what investors perceive to be the case. Their improving business and the accumulation of stock by institutional investors can allow for the steady, long term upward trend

The best time to buy these favored stocks is not when price has been bid up by aggressive buyers but, instead, when they break their short-term pullback in the upward trend. It is buying strong stocks when they are on sale but waiting for some confirmation that the buyers are coming back.

Specifically, if a stock goes up steadily for two weeks, don’t chase it. Wait for it to pullback for a few days, and then break the pullback with an up day. That is the cue that the upward trend is likely continuing.