Today's Quote: “All things come round to him who will but wait." Henry Wadsworth Longfellow.

It is a common question many new traders have. It is also a common mistake that all traders make. If we are supposed to buy that stock OVER 32.0, and it is now at 31.75, why not buy it now? Why not save some money?

The key is that if we are going long, we want to make sure the stock is moving up. Even in a small way, we want to see some ‘offer of strength’. (If we are shorting, the same applies. We want to see some extra sign of weakness.) Does that sign of strength guarantee the stock will move up? Of course is does not. But it does stop you from buying a free falling stock, or one that never makes a serious move in the right direction. And it increases your odds of the stock moving up dramatically. We will always pick on points of resistance, or supply, where there should be many sellers (or buyers) present. If the stock can clear that area without any problems, after several down bars, that gives us an indication it may be reversing in the short term. If you pick strong stocks that are on quality pullbacks, the only question is when that pullback has ended and when the rally will begin. Trading above prior resistance is the gauge we use. For example, on a daily chart we may use a prior day’s high as the trigger point after the rest of the set up looks good.

Of course, there can be other methods of buying stock. There are also times when the evidence is so over whelming that traders will correctly ‘anticipate’ the stock moving up. However, be aware, until you have the skill to make good estimations of these things, make sure your stock has passed the ‘strength’ test. It will keep you out of trouble, and remember, if you miss a play; missed money is better than lost money.