Many people ask me , how to find right time to buy a stock. How to find if a stock is cheap or expensive.
Finding a good stock and good price is not simple luck, it's an art as well a science.It's no luck that some investor always find excellent stocks while other simply get into wrong stocks. Experience does play a big role.
Two things to start with right stock and right price , First ... fundamentally strong stock is important to preserve capital in case of bad news. Second looking at stock charts to see if you are not getting too early or too late in a trend. For example , Castrol which had good run in last 2 month is over extended and getting your hand into this stock at this time have high chances of burning. It doesn't mean this stock can't go higher but there is more risk involved .
Best bet is trying to find stock that consolidating in small range after 20-30% run up.
Here is a good example, let's look at chart of KS OIL Ltd. Stock is consolidating and moving and slowly making new high. First thing I check is company is in a select sector , just to make sure that we are not going against the common trend. KS OIL is in food and commodity sector which is having good time and expected to do better in future.
As you can see stock made high of around 67 in mid october 2009 and traced back to 60 in low volume ( red bars are smaller than gree bars ). In mid January stock breached earlier high of 68 with strong volume ( big green bar ).
That simply means big investors or funds are buying this stock. They sale small amounts to make sure that they can get as much of stock as possible at lower price level.
KS OIL made another high of 76 in January , now it's tracing back and not too steep of downward journey .
I think this stock will again try to brake it's previous high of 76.
Sir,
Can you give us example for this sentence : "Best bet is trying to find stock that consolidating in small range after 20-30% run up"
I would be much glad if you could provide example. Thanks