If I am interested in a stock, when should I buy it?

Question

If I am interested in purchasing shares of a stock, how should I determine if it is the right time to buy it. Should I use charts? And if so, how should I do this?

Answer 1

Study first, in the market there are a lot of trading method like Nicolas Darvas, and others. Choose one study it and master it.
Normally, a good trading method should tell you when to enter the market, stop lost and money management.

Answer 2

There are two opportunites to buy stocks: (1) when you are interested in it, and (2) when you think your money will work more productively there than somewhere else.

We all have various reasons, and at various times, to want to buy into this stock or that. And we have heard a variety of cautions about when to, or not to, buy. But if you are investing, which is really different from trading, then it doesn't much matter when you invest but that you invest.

If your company pays a dividend, then you will want to watch the calendar so that you either get in before the cut-off date, or get in before the stock rises in anticipation of a dividend. If the stock bumps up enough prior, then you might want to watch for the price to fall when it goes ex-dividend and buy the stock at a discount. But not all dividend paying stocks experience this, and those that do don't always experience it exactly the same each time.

Suppose you were interested in Phase Forward (PFWD), a data mining software house, back in early April. Any delay would be expensive as the company made a relatively steady upward march. It was selling for about $14-ish then, and goes for upwards of $24 today. Maybe back in mid-May or September it was sideways long enough that it wouldn't have much mattered when you got in.

On the otherhand, if your company was Innerworkings (INWK), if you were thinking of getting in about this time last year, you would have been tremendously frustrated as it fell for about three months, going from the $18 neighborhood to something more like $12. But if you had bought in April, then too there would have been a satisfying upward march, that is until about the beginning of July, but then August and September would look sweet, until October and November.

Because of the uncertainties, some folks prefer to make distributed entries into a company. A concept called "dollar cost averaging" comes in handy by simply setting aside money at regular points (weekly, monthly, quarterly, etc.), and buy as much as your budgeted amount will buy. Obviously, if the stock is down, your budgeted amount buys more, and if it is up, it buys less. But if the company is and stays profitable, it is likely to increase in value (unless it or the industry falls out of the market's favor, but that is another issue). The cost basis of your stock, then, is averaged down, which can enhance the long-term profitability of your holdings in it.

Of course, just because a company makes consistent profits does not mean that it will be marching upward in price to match the EPS, that is where the PE (price/earnings) for old and profitable firms is smaller than the PE for less profitable companies. A similar thing happens for options (again, another story). Nonetheless, the shareholder value, owners equity, per share has risen. The intrinsic value of your stock has gained. When there is a market downturn, your higher value (equity) stock will tend to fall less than the high flying stocks of greater market price but lower intrinsic value.

If you are trading, look at the charts and check with the current market behavior. If you are investing, then buy whenever you like, like right now if you want.

Answer 3

You should definitely use charts to determine when to get in.

As to how - there are many good books on the subject. The bottom line is: there are critical points (pivots) when a stock is most likely to go up than down - those are your buy points.

Recent examples: BRKR (12/03/07); CPRT (12/05/07); VSL (11/30/07)

Answer 4

If one knew when the right time had arrived to purchase a stock he would be the " Prince of the Market". Buying and selling at any time is a" crap shoot" ( a gamble).Most investors who trade their own account have all the possible information at their disposal, follow the trends and news regarding specific companies, rumors on new processes in info like Micro Soft. and do well. Others who took their accounts out of registered brokers' hands to invest in the Hot Tech stocks a few years back lost their shirts.

Answer 5

if i knew when to buy a stock everyone would be my friend -- after study it and going over the chart buy when you feel the time is right!!!