I though what are they going to do? Look at charts? Run scans? I went to MarketWatch and searched on the term "cheap". What I got was a list of symbols vaguely similar to "cheap". Actually, it was multiple listings of two stocks. Giant companies, and anything but cheap. Up a lot, though, over a ten year period, I admit. Anyway, that was no good, so I looked at news a couple of different ways, and finally I found a headline, 6 solid growing companies to watch. I mean, this is MarketWatch, The Wall Street Journal. Here's the link.
Now look at this page. It's a ten year daily chart of the first of those six stocks. Fine. It's a solid looking chart, and it's going up fast, and it will probably continue to go up fast, but the time to be watching this stock was actually years ago, in 2012, say.
It's clear as day. It's exactly the kind of pattern I've been looking for, and seeing. But these patterns are, in a way, unreliable. What you want to do is study this chart intensively and think about when you might have thought it was a buy.
Any time it went down sharply, you might have thought that. What you would have thought might have been something like "it might go up a lot any day, I'd better buy it."
But experience will tell you any day is likely to turn into longish periods of time, with the stock sometimes going down before it goes up, and experience will also tell you that the stock is likely to make a distinctive pattern just before it does go up, but what is a distinctive pattern.
Study the history on that chart over and over. As it approached its ultimate bottom, there, it first went down sharply, and then it made a big round bottom. To make a bottom, it had to go up a little. Then, it went down again, and then it bounced off that first big round bottom, quite nicely, making another nice round bottom. To make that second bottom, it had to go up again, just a little. Then it went down again ... and made another bottom ... another nice round one again ... but this didn't take as long as the second one ... and it was a little above it ... and it went up, so it was a bottom ... and then it made another bottom, went up again, that is, but in just a few days, and again above the previous one. Classic. And we can see what it did after that. It went up 5 times in one solid move ... and then it went sideways, which even means down, but sideways, for a while. (Well, and now it's climbing. Would we, could we, should we still be in it is a whole other question.)
By the way, the sustained move paused in the area of earlier tops, earlier sideways patterns.
But look some more. Back between 2010 and 2011 sort of this stock bounced of bottoms, after dropping sharply, and then it dropped sharply again. This is where it gets really tricky. It's almost where you have to buy some, a little, $50 worth, even though this could happen. After all, now, some years later, that earlier purchase would be looking just fine. Still, is there anything to distinguish the early false bottom from the later real one? Well, in fact, the earlier one was all spiky tops and bottoms, and we've already noted that the second one had distinctly rounded bottoms in it. Is that a clue?
There might be other clues, for example "second time's a charm" seems to work. The first one sure looked like a bottom for a while there, and then the second one got more and more bottomish, at just a somewhat lower price. It was like a second chance, with an extra reward. And, since you left yourself room, by only buying a little, you can now buy a little more, with room to spare still.
It will be asked, can you make money with $50 investments? Well, if you bought this in early 2013, you could have sold it within a few months for five times your purchase price, and that's kind of money. If you held it, today it would be worth even more. Let me put it this way: that last idea is something to explore. Study the action after the 2013 rally really hard now, and try to draw some conclusions. I give it a try. I'll be back. As for the idea of placing lots of small bets, I'll talk about that more, too.
Anyway, this was a failed attempt to find a stock to buy. It looks like a good stock. It's behaving very well now. But 2013 was such a better time to buy it. Heck, even 2010 was better, seems to me. How do you do this? How do you find a stock that is at the apex of its decline?
