When is a stock cheap enough to buy?
For example, Fitbit Inc (FIT) shares got hammered yesterday… ending the day down by 21.19%
The stock is now below $4, as it closed at $3.31 on Thursday.
With that being said, some traders are looking to buy the stock because its cheap and “down too much”.
However, just because a stock is cheap… it doesn’t mean its time to buy.
You see trying to find whether the bottom is when a stock is plummeting isn’t the way to get rich in the market.
The way to make money in the market is to have a proven system.
If you see a stock is down a lot… take Fitbit for example… the first thing you should do is check the news… not just buy the stock because its down 21%.
The reason Fitbit was down so much yesterday was the fact that it reported earnings after the close the prior day.
In the earnings report, Fitbit cut its revenue guidance and stated, “With weaker Versa Lite sales, we are lowering the midpoint of our 2019 revenue guidance by $95 million to $1.455 billion from $1.550 billion and now expect full year 2019 revenue to be $1.43 billion to $1.48 billion…”
Moving on, once you figure out what’s going on in the stock… the next step would be to look at the charts. For the most part, if you’re going to be trading small-cap stocks and penny stocks… it pays to develop a useful set of chart patterns.
For example, if I’m looking to buy a stock that’s weak… I’m going to wait until one of my patterns show up.
You see, I wouldn’t actually be looking to buy Fitbit just yet.
Well, my charts actually have been telling me the stock is weak.
Fitbit was actually trading below some key moving averages… and the 20-day simple moving average (SMA) – the blue line – was actually a resistance level. In other words, the stock has a tough time breaking above that level.
Not only that, the stock gapped below the key support level at $4.
Unless the stock finds a support level (an area it has a tough time breaking below), I won’t be looking to trade it just yet.
For example, one of my chart patterns is known as the Staircase to Profits.
If Fitbit starts to trade higher… pull back slightly… and break above recent highs, then I might look to buy it, just like the same chart above in Tautachrome (TTCM). However, there needs to be volume.
You see, this pattern is actually repeatable… and as you can see, it’s pretty easy to spot.
If you refer back to the TTCM chart…
I actually bought shares and planned to take profits if it traded 10% higher.
However, I got more than expected, as the stock opened higher the trading day after I bought shares (I bought shares on a Friday and sold on a Monday).
Now, the next time you see a stock that’s down a lot and selling off one day… it doesn’t mean you should go out and buy shares… thinking it’ll rebound and you’ll make a ton of money.
The way to actually make money is to follow a simple system. I’ve actually developed one of the easiest to use penny stock trading strategies that’s allowed me to generate 364.14% in returns in just 6 weeks… heck, I was up 299% in just a month.
Keep in mind, I’m actually trading with a small account.
Well, I’m tackling the Small Account Challenge again and looking to turn $3,000 into $100,000.
I did all that by using my chart patterns… and my 5 step trading plan to building small accounts – what I call The Profit Prism.
Now, if you want to get more details about how the system works and how it can help you achieve extraordinary returns… fast… then please reply to this email with any questions you may have.