Here's When to BUY and SELL A Stock Exactly (2020)
So in this video today we're going to be talking about when i buy a stock, and when i sell a stock, and in particular. What to be looking for with the charts. Now when it comes to investing, in a stock, there's basically. Two schools of thought, one of these is technical, stock, analysis, which is looking at the charts and the price movement. And the second, is the fundamental. Stock, analysis. And essentially. Doing your own research, on the company. And combing, through financial, documents. In this video today we're specifically, going to focus on the chart side of things, and i'm going to talk about what i tend to look for, when i personally. Pick a stock to invest, in and i'm also going to tell you guys, what i avoid. However, i just have to say this guys you never want to invest, in a stock, solely based on the charts, you want to go ahead and do your own research, and conduct that fundamental. Analysis. Before, investing, in a stock, so we're gonna cover what i look for in the charts today. And potentially, in a later video, i can talk about the fundamentals. And what i'm looking for when making an investment. Lastly, before we get into the video here guys i just have to make this disclaimer, that i am not a financial, advisor. This is not financial, advice. And you should always do your own due diligence, before, investing, in the stock market, but that being said guys, let's get into the video, and take a look at a couple of different, stocks. All right guys so first of all we're going to talk about when to buy a stock. Based on the charts. And we're not going to get into anything crazy here looking at candlestick, charts or anything like that, we are simply going to be looking at line charts, that show us the price of a given asset. Over, time. And the very first chart i want to show you guys right here, is arguably. The most, important, chart, you can learn, about anything, out there related, to investing. And this is a chart that shows what a speculative. Bubble, looks like, and if you're looking to stay out of trouble in the stock market, or with anything, out there that trades, and has value. You need to familiarize, yourself, with what this chart looks like, and avoid. This, at all costs. So by far, this should be the biggest, red flag, on your list as far as something that you do not buy, and it's hard to avoid.
Speculative. Bubbles, because they're often talked about a lot, and it's where a lot of people are, directing, their attention. However, the main problem here with a speculative. Bubble, is that by the time you find out about it you are in this phase right here where the general public, is aware of this investment, opportunity. And, the time has already passed, where you can get in on this investment. At a reasonable. Valuation. And essentially, when you invest in something you want to see a gradual. Increase. In the price of that asset, which is, uh indicated, here by this dashed, line that would be what you would want to see, when an asset begins to take off in this exponential. Manner, it is just not sustainable. Growth. And it's not something that is most likely going to be a long-term. Trend. Now later on in this video we're going to talk about what i would do if i personally, owned an asset, that i bought over here, and began, to resemble, this chart, however, if you're looking to buy. A stock, out there, and the chart looks anything like this, trust me guys, stay away from this at all costs. You can thank me later. These are nothing but trouble, they're exciting, at times, but if you buy at the wrong point here, you could get caught in a nasty, sell-off. And be stuck, bag holding an asset for years to follow. Based on the fact that that rally, was unsustainable. And essentially, what happens, with these speculative. Bubbles. Is that these early investors, the smart money the institutional. Investors. Who got in early on, at a certain point here, they're gonna decide, hey you know what, i have made enough money, i'm ready to sell, and then when you have more people selling than buying, you're gonna have this peak reached here, and then it goes into the sell-off. Where the selling pressure, is more than the buying pressure. Then what happens, is new investors, who are looking to buy into this buy the dip, and then you have a bull trap where there's this false rally, before, an additional, downtrend. And then after that the price returns, to normal, and what you want to see is a gradual, increase, over time, which is a, realistic. Type of appreciation. For this asset. So i want to cover a couple of examples. Of speculative. Bubbles that we have seen in the past. So first of all we have the dot-com, bubble which happened, in the early 2000s. As you can see here the nasdaq, which is a tech heavy index. Was keeping pace with the s p 500. For about you know five or six years here, then out of nowhere, it went parabolic. And we see that same chart play out where it reached a peak, there was a sell-off, and then there was a couple of other false rallies, before it returned to the mean here, and tracked, the s p 500.. This chart almost, always. Plays out this way guys. Learn to recognize, it and in my opinion. You should avoid, this, chart, unless you're somebody who got in over here and you're able to sell somewhere, up here but 90. Of the time maybe even 99. Of the time, that is not the case. Another example of this a more recent example, is bitcoin.
In, 2017.. We had a massive, rally here that led to a bitcoin, price which peaked around. 19. Dollars per coin, before, a, massive, sell-off, and then an even larger, slide. Down to around, three thousand dollars, per coin. However, i mean bitcoin's, a pretty volatile, asset, but now if you look at the last year or so, we have seen it trading within a certain price range that, uh you know is a little bit more sustainable, but bitcoin. Uh in cryptocurrencies. Are very volatile, it's hard to have any consistency. Here with the chart, but without a doubt, this was a speculative. Bubble, and this is what you want to avoid, unless you bought in back here somewhere in here, you never buy anything, that is resembling. This type of straight, up line. That is the very first chart you need to avoid. So that being said guys, i think we are seeing this chart play out with a couple of different stocks, right now and i just want to go ahead and say this right now, i could be completely, wrong about this and. Shopify, stock, could continue, going up in this manner, or it could have a substantial. Retraction. I have no idea. All i'm telling you guys is i personally, do not buy charts that look like this. The issue i have with this, is we have this, appreciation. Happening here that looks to be sustainable. It's going up at a steady rate of growth, where if you follow my cursor here and not what the chart does, you can see it begins to deviate, from that line, even more so in april of this year, with the global, pandemic. Triggering, this renewed, interest, in e-commerce. And then we have this stock pretty much tripling, from april to where it is today. And to me, that is not a char i would personally, invest, in, because i don't feel that type of growth is sustainable. And another stock we're going to pick on here this is a lot less severe, but this is nvidia. And the same thing happened with this stock, back in 2018. Where, it kind of got ahead of itself. Went to about somewhere around 280 per share then it went into a sell-off. To less than half of where it was, and this is what you can run into with a stock like this, is if you buy up here, you can have a massive, sell-off take place and it takes a long time. Oftentimes, a year or more to get back to your cost basis. Of what you paid, and again. I'm concerned, about this rally here getting to be unsustainable. Again where the price has basically, doubled. In a period, of a couple of months. And again guys i just want to restate, this that this has literally, nothing to do with nvidia, or shopify. I actually like both of those companies. We are solely. Looking at the chart, and to me looking at that price chart these look like red flags, to me, so in a nutshell, if anything resembles, a speculative. Bubble. I do not buy it, the next chart we're going to talk about here is equally, important. And that is called the falling, knife, which has been one that i have gotten in trouble with in the past, and we're using general, electric, as an example. Now they call it a falling knife because what happens, is, people will grab, this stock. Thinking it has reached a bottom. However it continues, to go, lower, and lower, and that's exactly what happened to me, around 2018. I was watching general, electric, i was paying attention to stocks. On the dow 30, and i saw this stock was trading at 30, per share, and then it went down to around, 20, and when it went from 30 to 20, i said okay, that looks like this stock is pretty cheap, and i began to buy shares in late 2018. At around 18. Per share. I thought that stock, was cheap, however, as you can tell from this chart here, obviously, the stock continued, to fall, and it hit a low over the last 52, weeks of five dollars and 48, cents per share. So this chart is equally dangerous, it is called a falling knife. And the main issue with buying this chart, is you're going against the grain here, the overall, trend of this stock, over the last five years, is that it is going, down. So if you were to take a guess as to where that stock is going. It's probably going to continue. To do what it's doing, so i do not buy falling knives like this anymore, general electric was a good example, of this for me, uh and i'm still holding on to this stock you know, two plus almost three years later. And i'm still down about 50 percent, i may eventually, just cut my losses, on it but this is called a falling knife, it's tempting, because you think you're getting a good deal, but calling the bottom on a stock.
Is Literally, impossible. And you want to follow the overall, trend, so if it seems like the chart is pointing down, that's probably where that stock is going to continue, to go, and then another falling knife here this chart is a beautiful, picturesque. Example. Of a falling knife, that is ford, stock. People have been trying to call the bottom on this stock for the last five years maybe even more, if we open it up to the last, 10 years we can see a perfect. Falling knife here where it just keeps making, lower and lower lows. Where if you bought the stock at. 15, thinking it was cheap it keeps going down then you buy it at 10, then you buy it at you know even five dollars thinking it's cheap but it appears that this stock is just continuing, to go down. This is just a chart, i would avoid, personally, i don't buy falling knives anymore. It's tempting but you have no idea, where the bottom, is. This chart is generally, trouble. And then another example, here we have, macy's. Stock which is an even more severe, example, of this falling knife pattern. Obviously, coming out of the housing market crash in the great recession. This stock did exceptionally. Well climbing to, somewhere around, seventy dollars, per share. Now we're trading, at, less than, ten percent, of where that was which is insane. Uh but if you look at the last, five years. Classic. Falling knife. This is something you want to avoid. Even though it looks like it may have bottomed here, you don't know that for sure because, you may have thought we saw a bottom, you know at some point in here but it continued. To fall, and that's the issue with these falling, knives is you can have these false rallies where the stock appears to be going up and then it goes, right back into that overall. Downtrend. So you want to take your stock that you're considering. You want to open it up to a five or ten year chart, and look at, what is the overall, trend of this stock, is it going up is it going down. And the thing is this isn't always going to keep you out of trouble, because if you looked at macy's, stock, anytime, in the early, 2010s. You would see the trend is this stock is going up but unless you knew to sell the stock somewhere around 2015. You would have been caught in that downtrend. But generally, speaking. You want to avoid. Falling, knives, and at all costs, avoid, these speculative. Bubbles. So that being said, what charts do i personally, buy, i look for one of two charts. First of all, the first chart that i look for is a stock that is trending, upwards. But is experiencing. A bit of a retraction. So i don't like to buy stocks, at 52-week. Highs, which means it's making a higher, and higher, close. Each and every day, and i also don't like buying stocks, at 52-week. Lows. If you see a stock at a 52-week. Low, it could easily be a falling knife or it's continuing, to decline. And if it's a 52-week. High, it could be, approaching. Speculative. Territory. Where the price that people are willing to pay is just climbing, higher and higher, and that valuation. Is becoming. More and more unrealistic. What i like to find. Is number one a stock, that has reached a 52-week. High and is experiencing. A bit of a retraction. But is still. In the context, of an overall, uptrend. Now i'm going to open this up to a wider view so you can see what i'm talking about here but since about 2011. Bank of america stock has been going up, and they're in the context, of an uptrend. However, based on the recent pandemic. The financial, sector got hit pretty hard, and the stock went into a sell-off.
We Went from around 35. A share, down to 18, basically, 50 percent off, but if you look at the five year chart here, the stock is still in the context, of an uptrend. It just had a sell-off, and i would expect, this chart to continue. Now there's no guarantee, here guys, and you don't want to buy solely based on the chart, but this is one of the things that i look for, when i personally, decide to buy a stock. Now i don't personally, own bank of america, i do own this stock right here which is a smaller bank in my area which is key bank and i'll show you guys, what that chart looks like now. And you can see the same type of chart playing out right now with key as we have with many other banks. Essentially, they're in the context, of an overall, uptrend, that started somewhere around 2010. But the recent pandemic. Put them into a sell-off, which hopefully, the overall. Long-term. Rally, is continuing, with this stock. And then the other chart that i like to buy is this one right here and i actually, bought more shares of advanced, micro devices. At 52. Per share, and it's kind of funny timing here because the stock finally, popped, today. As i am recording, this video. But i call this chart here, the pressure, cooker, and what that means, is, the stock is experiencing. An uptrend, which started back here i actually started. Much further back here if we go on a five-year, chart, it started as far back here as 2018. Where the stock began going up, so we look at this chart, on the five-year, level and we say, the overall context, here, is an uptrend. The price chart is moving up so we're going with the grain, we're not going against the grain. Buying a chart that's going down, but if we look at the last year, you can see the stock went into a pause. So it climbed from around, 29. Per share. Up to a high of around, 50. It experienced, a bit of a retraction. Here, and then it traded, laterally. This right here is what i'm referring to as the pressure cooker, the stock price hasn't gone down. But, it has taken a pause here, where the price hasn't broken out to a new level, and then coincidentally. The price finally, started to move if we look at the last month here, amd, stock, is moving quite a bit, and today alone it's up 12 percent. And if we take a look at the five-year, chart here, it's a little bit harder to see but we had the same thing happen back in 2019. The stock climbed to a certain level, and then in this 30 dollar range it took a pause where from june to september, it looks like, it traded, at around 30 dollars per share, this is like the pressure cooker, and then that pressure finally gives off pushing that stock to a new rally.
And Then we have a pressure cooker phase again, which i believe, is happening, here, with amd. So this right here is the second, chart that i buy, when a stock is in the context, of an overall, uptrend. But it's having a pause. Where it's trading, laterally. For a period, of time. All right guys now before i get into when i sell stocks, i want to quickly mention, if you are looking to open up a brokerage. Account. Weeble, is a fantastic. Option. For commission, free stock, trading. And if you use the link down in the description, below, you're going to get two completely, free stocks, when you open the account, and fund it with 100. Or, more. So just for opening up the account you're going to get one free stock, valued between, two dollars and fifty cents, and up to two hundred fifty dollars. Then when you fund the account with a hundred dollars, or more on your initial deposit. You're going to get a second free stock, worth a minimum, of twelve dollars, and a maximum. Of, 1400. So if you guys want to get at minimum. 14.50. Worth of free stocks, and that maximum. 1650. That is going to be the top link in the description, below, and i am affiliated, with weeble, so i may earn a small commission, in the process. Now i'm sure this comes as no surprise, here but the only chart that i really, sell. Is the speculative. Bubble, chart, and i'm showing you apple stock right now because this is a stock that i own, and it's not a speculative. Bubble. This is a sustainable. Rally, in my opinion. And this is a stock that i currently own and i'm going to hold on to it, the reason why i like this chart, is because if you look back over the last five years, this rally started around 2016. And if you just follow the line. Follow my cursor. It's continuing. That same type of rally which seems to be long-term. And sustainable. Even though we had a quick, uh return to this rally if you follow the peaks. It's still following, that same trend line, so this is a chart that i like, i am going to hold on to apple. However. If this chart here the most recent one continues, for a period of time. Uh let's take a look at the we'll leave it here just for example. If this chart continued. And all of a sudden we saw apple hit you know 550. 600. By the end of this year. That is when i would say okay. Maybe i want to sell this investment, because it broke that trend. And it seems to be becoming, unsustainable. An example of this right now. I don't own this stock but i believe this is happening with tesla. So right off the bat first of all guys i would never buy this, because, it seems to be resembling, a speculative, bubble. Emotions, aside. Pretend, this is just a random, stock you don't care what company it is, look at the chart, if it resembles, a speculative, bubble, i personally. Avoid it and we had a similar. Event happen here earlier this year, when the stock had a massive run up to about a thousand dollars per share, and then it sold off to around, 420. 430.. So we've already seen this happen with this, with this chart, to me this is a red flag, regardless, of the fact that i actually like tesla as a company, and so this is pretty much the only chart that i sell is when i own an investment. And it begins to resemble, a speculative. Bubble. This is good, this is what i like to see, that's fine and dandy, if i start to see a chart that looks like this, i may decide, to take profits. And overall, this is based on the fact that i am a long-term. Investor, i really have no interest. In short-term, trading, for many reasons. The biggest one for me is the fact that, i pay a lot more in taxes, on short-term, capital, gains, than long-term, capital, gains, so when i make an investment, in a stock like apple or amd. For example, i'm looking at this as a three to five year investment. So i'm hoping. That for the next three to five years, the chart continues, this same trend line, that way it's sustainable. Growth over time, and if it doesn't, and if we see some kind of speculative, rise with this stock. That is when i may decide to sell, and, revisit. My research, phase and find other stocks to choose from, so anyways guys that wraps up this video i hope you enjoyed it if you did please go ahead and drop a like and subscribe. So you get notified, of any future, uploads. Like i said i may also do a video on the fundamental. Side of what i look for, when buying a stock and potentially, why i might sell one, if you guys want to see that video.
Let Me know in the comment, section, below. If you want to grab those two free stocks, from weeble. That's the top link in the description, below. And thank you so much for watching, and i will see you in the next, video.
2020-08-03 16:08
