Best Way To Determine Entry Points for Stocks?
Hi,
I'm looking at buying either XOM or CVX (btw, any opinions on which one lol) and I was wondering what you all typically use to determine the entry points for stocks? For a casual investor like myself, what's a good way to determine what price to pay for stocks? I used to just look at price movements and see where the stock is trading at a decent price, but I've learned that this is completely stupid way to do things. Depending on how earnings grow, a stock may be cheaper at a higher current price than historically because earnings may have grown more quickly than price and diluted the P/E ratio. So any ideas?
Also, I'm hesitant to buy anything at the current dow level of 11,300+. I feel that there are still a lot of uncertainties in the economy, and I was pretty surprised that stocks rallied as much as they did. Would you buy right now, or do you see a pullback?
Thanks for the help!
qualitative technical analysis like that is completely worthless. just buy the stock if you want it
I too wanted to find an answer to this so I borrowed this from another member
I was wondering what you all typically use to determine the entry points for stocks? For a casual investor like myself, what's a good way to determine what price to pay for stocks? I used to just look at price movements and see where the stock is trading at a decent price, but I've learned that this is completely stupid way to do things. Depending on how earnings grow, a stock may be cheaper at a higher current price than historically because earnings may have grown more quickly than price and diluted the P/E ratio. So any ideas? - Original Poster Al Bundy-
You can't time the market.
lol my first post would be on a year dead topic, but just to throw my 2 cents in... I wouldnt buy either right now because historically both companies are expensive. At around 88 and 110 respectively, there is alot of resistance for both stocks and its at that point they should fall to the 70 and 92 range. I think it would be smarter to wait a little longer for the pull back. imho
Entry Points to stocks after deep fundamental research (Originally Posted: 12/28/2011)
I too wanted to find an answer to this so I borrowed this from another member
I was wondering what you all typically use to determine the entry points for stocks? For a casual investor like myself, what's a good way to determine what price to pay for stocks? I used to just look at price movements and see where the stock is trading at a decent price, but I've learned that this is completely stupid way to do things. Depending on how earnings grow, a stock may be cheaper at a higher current price than historically because earnings may have grown more quickly than price and diluted the P/E ratio. So any ideas? - Original Poster Al Bundy-
Read Darkside of Valuation...
Yeah I was thinking about that book. Do you really think it is a good to pick up and would it really help answer my question?
Its the bible of equity valuation...its very well written and has examples....you can also google the professor's equity val spreadsheets and conduct your analysis simultaneously...you should keep in mind that the best valuation uses both fundamental and relative analyses
Techniques on when to enter/exit a stock after due research: help! (Originally Posted: 06/14/2013)
So, you have done your research, covered all the corners, done your time/risk/return valuation and now you have to enter a position. I've tried to read as much as i could (hoping to have missed not so many things) that was related to this topic in this forum and in the internet and basically i found out that:
1) It's super hard no matter how you look at it 2) Technical analysis maybe be good but which specific indicators should i look at? 3) Forecasting tools (time series) are useful but subject to error (or really?). Hence, are they useful at the end of the day?
I was wondering whether there were some materials or some tips or "thumb" rules to help me feel a little bit less like a lost sheep.
Thank you very much.
Exit when your valuation is realized. I did a DCF on SODA when it was trading ~$33 which gave me a $67 PT. Since it's at ~$68 today, I threw in a stop loss to sell half my position at $65. Otherwise I'll keep it and let it roll.
Entering, buy a little (no more than 1% of your entire portfolio) and then buy a little more on dips. So if you want to allocate $5000 to a stock, spend $1000 now, then buy in small increments on the way up/down and dollar cost average.
well that for sure. what i meant was a little different: let's say you have a 50$ valuation and currently the price is fluctuating around 30$ and the price moves in a 15% interval. this means 45% - 96% profit range (numebers are exagderated but it's to communicate my point). how to figure out, through technical analysis/forecasted series/econometric indicators when it's the best moment to buy?
Ah, I get what you're saying. Unfortunately I am not very proficient with technical analysis so I couldn't help. Maybe someone else can chime in?
If your thesis gets canned get out asap.
Precise valuation is subjective but fundamental thesis points are not.
FWIW the last time I spent a lot of time on a DCF model was during my internship.
Nowadays I usually use comps, liquidation value, or SOTP.
Almost all the time you will be using comps or valuing business segments then adding them up (at least in my experience).
Although DCF has merit, I find it extremely difficult to justify the preciseness of say... any of the assumptions. The only time I ever see a DCF used is in a table format with growth rates from a to b and your discount rate from c to d. I think it's one of the things they really hit hard on in school (esp. at Stern for some reason... I didn't go there) but really lacks practically in actual investments.
From what I understand banking uses DCF very heavily. Not surprising given you can play around with the variables to justify anything you want... but that's just cynical me.
yes well i admit at first i found DCF quite malleable with regards to its precision but i thought it was me being inexperienced. i don't want to be redundant but it seems to me that liquidation values or SOTP are more useful in a PE mindset when you acquire the company and then decide to tear apart the different divisions. considering i would like to perform some valuations which do NOT include the control premium, how do you acquire a non relative value? i mean definitely comps give you precious information but htey don't give guidance about what price you should exit and so the price you should enter (given your margin of safety)....
again i might be missing something along the way... i just want to understand what i am dealing with and how to come up with a valuation which doesn't give me false confidence.
RSI/macd/bollinger bands. RSI isnt very helpful now as most things fall into the overbought category
I prefer simple moving averages & volume to time my entrances. If my expected holding period is 3 months I'll use a 30 day moving average.
My entry conditions are: 3 week moving average of volume is increasing, volume 1.5x previous week's MA and price crossing 30 day close MA (which also must have a positive slope).
As others said, I ease into the position. I typically buy 1/4 of my position every standard deviation above my entry price (using daily close) for 4 standard deviations. Then I set stops 2 standard deviations below my entry point, and as the close price increases I move the stops up to stay 2 standard deviations below & 4 standard deviations below, 1st point pulling half my position out, 2nd point closing position entirely.
This helps protect me from getting whipped out of the position by a moody market while still getting me out if the market truly goes against me.
I Don't exit until: 1. My stops are hit, or 2. I find an investment that's moving in my direction and has higher potential for gain than that current position based on my valuation in relation to market's current valuation.
My strategy is this: Identify companies that are fundamentally strong & undervalued, then wait for the market to decide to agree with me. Hop on before most of the big guys do, ride their wave up, jump off at/near the plateau, then go get drunk.
Questions? Comments? Go team!
You can enhance your approach a bit by looking at competitors in the same industry and the index of the sector (or etf). If the stock is the group leader, how are the competitors trading relative to it? If not the leader, what is the leader doing? What is the beta to the overall market? Or relative to a given commodity or other sector on which it depends on supplies?
Scale in and scale out. Use a trailing stop that rises as the stock rises, and if you insist on entering a stop loss order remember to use limits always. The HFT bombing of stocks on a periodic basis make stops difficult to use effectively, and market orders hazardous.
Last don't over think it. You did your homework, structured your entry and envisioned your exit.....now watch the behavior of the stock to the catalysts you have identified...and the ones you didn't. Reactions are valuable information in a fluid market.
If you are using technical analysis as one of your tools remember to keep it simple. Less is more.
Candidly, if you have a $50 valuation and the price is around $30....buy. Don't try to time the market too much, trust in your research and valuation methods, and if it's undervalued get in while you can.
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