When stocks we like start to drop, it’s tempting to jump in and buy. But knowing when to buy is crucial. Valuation is always important. Yet, in times of market fear, valuations often get ignored. Sellers just want out, which can lead to irrational price movements.
Understanding market behavior is key. Sometimes, charts can guide our decisions. They show us how all investors, both rational and irrational, are acting. For example, recently the S&P 500 started to recover, but the previous day’s downturn still stings.
To make sense of the chaos, we keep our analysis straightforward. We look at support and resistance lines using the 50-day and 200-day moving averages and examine momentum indicators like the Relative Strength Indicator (RSI). Volume also plays a role. If a lot of shares are traded at certain price levels, it gives us confidence in what the charts are telling us.
Even in turbulent times, buying solid companies at good prices can make sense. We recently bought stocks from Corning, Honeywell, and Meta Platforms.
Microsoft Insights
Let’s take a closer look at Microsoft. Currently, the stock is about 6.5% off its all-time high, trading around $500. The $495 mark has shown strong support, bouncing back from this level both in early September and again last week. If this price holds, it’s a good opportunity to buy. If it drops below, the next support level might be closer to $465.
Interestingly, the Polarity Principle tells us that past highs can become future support, which makes that $465 level significant. If Microsoft reaches that point, it would mean a nearly 15% drop from its highs, trading at a valuation of about 29 times future earnings.
Nike’s Turnaround
Now, let’s consider Nike. The company has faced challenges but is making strides to turn around its performance. Currently priced around $65, we believe it’s a buy based on expected earnings recovery by the end of the fiscal year. However, the stock remains below key moving averages, forming what’s known as a “death cross,” which can signal caution.
We expect the $60 mark to act as a level of interest. If it drops lower, into the mid-$50s, that price could present a great buying opportunity, especially given the progress the company has made.
Understanding Price Action
So, what does “price action” mean? It refers to how a stock moves in response to news. For instance, if a stock rises on bad news, it could signify that investors have been overly negative. Conversely, if it drops on good news, it could mean too many expectations were already built in.
Reading price action helps us understand when to invest while keeping our emotions in check, especially during volatile times. Strong stock selection is critical. We only focus on companies we trust, relying on both charts and fundamental analysis to guide our investments.
In conclusion, your approach can be methodical, helping you navigate ups and downs in the market without losing sight of your long-term goals. Always remember, effective investing combines both analytical tools and a strong belief in the stocks you choose.
For more insights and updates on market trends, check reputable financial sources like CNBC or Bloomberg.
Source link
big picture,Breaking News: Markets,Markets,Investment strategy,Jim Cramer,S&P 500 Index,Corning Inc,Honeywell International Inc,Microsoft Corp,Nike Inc,business news
