BUYING on DIPS are only for stocks with strong fundamentals and technicals like SEBL, JDSU, RNWK, CMTN, BVSN, BOBJ, SONE, SDLI, EXAR, EXAP, PIOB etc. They should be triggered using ONLY the daily charts although you can enter on the 10-15 minute chart after the trigger. (the trigger in this case is the bounce off the support or the bottom Standard Deviation trendline) These are stocks that can be found on our watch lists but more likely they are 'repeat' earnings plays or stocks that have had their first positive earnings quarter. Look at the charts of WEBT and ALLR and note that I was thinking of buying WEBT on the dip but never ALLR. The ALLR chart offered a buying opportunity as well as WEBT but WEBT is stronger, more historically able to be planned, charted and predictable. PUMA used to be, now its a little scary, so I would not buy on a PUMA dip, but on a modified dip (when the dip is reversing but the stock is not yet in positive territory).
Bollinger bands strategies with candlesticks, and DMI's (Directional Movement indicators like ADX) are better for intraday entries on rockin' and rollin' stocks, both up and down (i.e. MSTR, CRA, etc).. These charts look like the rockie mountains relief maps. These are based on volatility and offer good intraday signals.
Buying on DIPS I did not use for MSTR which was a short yesterday, but a long today and not based on "Standard Deviation Channel" breakouts but other indicator breakouts. The standard deviation channel is reserved for strong stocks that rarely stray out of a tight trading range like ELNT, BOBJ, GILTF..etc.. also. They are best reserved for "Earnings Plays" that have had relative strength rankings above 85 or even 90. They don't necessarily have high volatility.
If you don't want to buy on the dip than buy
a) on a breakout from a base (t base should be no more than 20% of the width of the base)
b) improving fundamentals and earnings are revised upwards
c) target should be the 20% from the top of that base or the original 'high' whichever comes first.
Never the stocks that are 'one day wonders' or especially biotechs which are in extremely 'untight' and wide trading ranges and should be tracked by bollinger bands, and other trending indicators.
I bought SEBL at the dip and I rarely buy at a dip. I didn't even buy ABSC at the dip when others asked 'is it bottomed'.. I did get ABSC when it moved above its 75% point of intraday trading range, but I had no illusions this would be a long term trade. I certainly wouldnt have bought MSTR at the dip, because honestly who can say when the dip is over or you're just in the bottom is a false bottom. When the stock has a "question mark" and a problem I would not buy the dip. I bought the dip on SCII as well because I think that is a strong stock but with its super-duper acceleration its a 'modified buy on the dip' meaning I might buy but I don't intend holding more than 48 or 72 hours. I did not hold SCII past the close today. |
