For the purpose of full disclosure, I did not buy this stock because it gapped up past my limit price, but what is important here is to show you what I think are important technical indicators to help you pick a good entry level.
AMD:
stockcharts.com[h,a]daclyymy[pb50!b200!b25!b9!f][vc60][iut!Ub14!Ua12,26,9!Lh14,3!Lc20]
When looking at the chart, you will notice a hammer pattern, at the very bottom of the down trend, just four trading sessions ago. That long thin line protruding from the underside of a red rectangular shape is called a lower shadow. The lower shadow should be three times as long as the body, the longer the shadow the better.
This pattern indicated a possible trend reversal. Confirmation of the trend reversal is required. Confirmation would be an up day following the hammer pattern. We got that up day on Thursday with a long white candle. This was a significant confirmation of a short term trend reversal. A small white candle would have been OK, but a long candle is much better.
The next two days were up days showing that the hammer pattern was correct in indicating a near term trend reversal was coming. The confirmation of that pattern is critical though, so keep that in mind.
You will also note that the relative strength indicator and stochastic indicator were both in oversold range when the hammer pattern appeared. The RSI crossing up over 30 and the Stochastic crossing up over 20 were both buy signals.
The MACD indicator had turned up and is now looking like it may want to cross up and over the 9 day EMA line. This would confirm a bullish trend.
My personal preference in short term trading is to shoot for 7-8% moves in 3-5 days max. Take the money and run, then look for another opportunity. We're in a bear market so it doesn't pay to be greedy and plenty of opportunities will come our way due to a lot of stocks being near or in oversold range.
AMD gapped up almost 5% at the open today. That was too much risk to take since I was looking for a 7-8% profit. It missed my limit order. If I got in Friday, like I was supposed too, (but wasn't paying attention to AMD that day), I would have sold the open this AM.
Again, I'm only trying to share what I look for in ST trading. Don't let the fact that I missed this opportunity influence your thinking. Putting these indicators to work on your favorite stocks is my objective, not my personal trading.
By monitoring stocks that are oversold, and waiting for the technical indicators to show positive reinforcement, it takes a lot of the downside risk out of the stock. If your stock crosses up and over a buy signal and the indicator turns down again within a day or two, get out. You'll only have a small loss at this point. Wait for the indicators to turn up again.
No guesses, no hunches, the market tells you what to do, or not to do. The market is always right.
AMD may give back some of its recent move as some profit taking may go on here from short term traders.
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