Buy Low, Sell High?

  • SumoMe

The act of “buying low and selling high” has long been regarded as the “ultimate goal” of the “average investor”.   But is it actually achievable on any kind of a consistent basis?  Depends who you ask, I think.  Another reasonable question is “is it even necessary?”  As a trader and investor who has spent a lot of time focusing on trends and relative strength, I would aver that it is –in the immortal words of Radar O’Reilly – “not necessarily necessary.”  Still, opportunities are where you find them.

One website I like a lot (in the interest of full disclosure, part of the reason I like it a lot is because they often link to my articles) is The McVerry Report.  If you are a market junkie (“Hi, my name is Jay”) or have even just a passing interest in a wide variety of market thoughts, McVerry is an excellent place to visit.

Way Up and Way Down

So today I will highlight two diametrically opposed ideas.  For the record, I am not endorsing these websites per se, nor am I endorsing the ideas set forth.  All I am saying is that I found them to be interesting and I believe that you might as well.

The first comes from www.StockCharts.com and highlights ticker LIT – an ETF that tracks the price of lithium.  As you can see in Figure 1, LIT is exhibiting a few “classic” signs of a blow off top – a parabolic move up plus a potential double-top.1Figure 1 – Ticker LIT; A parabolic blowoff and a double top?  Only time will tell

Has the rally in LIT run its course and is it doomed to collapse from here?  Not necessarily.  But I for one will be keeping an eye on this one.

The second idea comes from www.Stockerblog.blogspot.com

I recently wrote an article about the “potential joys and likely sorrows” associated with picking a bottom.  The two stocks highlighted don’t exactly fit that bill.  They are more in the “stocks forming a potential long-term base by moving sideways in a range for an extended period of time” category.

Very often – but definitely nowhere close to always – stocks that build a long narrow base eventually breakout to the upside and can register significant gains.  Under the category of CYA, for the record I am not suggesting that that will happen with the stocks displayed in Figures 2 and 3, nor am I recommending that you buy these stocks.  The truth is I don’t even really know what either of these companies do, what their fundamentals are, etc.

I just like a long, tight consolidating base.  Whether either of these examples pan out remains to be seen.  But you get the “picture.”

2Figure 2 – Ticker BEBE

3Figure 3 – Ticker SPRT

Summary

The average reader might come away from this piece thinking “so this Kaeppel fella wants me to buy BEBE and SPRT and to sell short LIT.”  Um, no.  All I am saying is this:

Securities that “spike” higher and then form a (potential) double top often have trouble making further headway.  Likewise – and more importantly – if a security exhibits this pattern and then starts to break, the subsequent decline can be swift and severe.  Will that prove to be the case with LIT? We’ll have to wait and see.

As I learned from my AAPTA colleague Charles Kirkpatrick, buying stocks that have formed a long sideways base is an extremely viable approach when it comes to achieving long-term investment success.  Does that mean that BEBE and SPRT are destined to soar? Not at all.  But they might be a good place to start looking.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

 

 

 

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