- When To Buy Growth Stocks: How A Three-Weeks-Tight Pattern Gives You An Extra Buy Point
This week's ONE THING might require a basic understanding of technical analysis. Come back again next week if you want to read about ideas and business.
So many people are making money in this bull market, whether you're into the stock market or cryptocurrency. If you managed to start a position with a good entry price, the next step is to learn how to add more shares to a winning position. That's why today I'm going to share with you a strategy called the three-week-tights.
How many shares you should buy?
- Now the three-weeks-tight pattern is considered a follow-up buying opportunity which means it should be used with a fraction of your full-size position
- It is also important that the stock you're looking at has great fundamentals
- If you buy with the same amount of shares, your average price will go up dramatically, making you more vulnerable if the stock pull backs
When does the 3-weeks-show show?
- In a bull market, the first time to buy a stock is when it clears a base pattern like a cup and handle or double bottom
- If the stock rallies for 5%, 10% or more and refuses to give up, you should start having a look at the weekly chart
- If shares close at nearly the same price in prior weeks, this means that the overall demand is extremely high and another breakout is waiting to happen
- If the difference between each weekly close exceeds 1.5%, the three-weeks-tight pattern likely has flaws
- The time to add shares is when the stock climbs at least a dime past the highest intraday price in the tight pattern, ideally in strong weekly volume
Not all three-weeks-tight work. Sometimes a sudden not so good corporate news can cause a panic sell or stretch the three-weeks-tight to a four-weeks-tight.
At the end of the day, it's still up to the drunken pyscho, Mr Market.