Greenspan recently has said that stocks are cheap. However, the market continues to run up. The thing to concern yourself with is buying stocks at 52 week highs that have been there for awhile. If it just makes a new high it could easily be the start of a new run. However, generally if you wait until a stock has been continuing to go up without at least waiting for a pull back, you are playing a dangerous game.
An alternative is waiting for a pullback. Interestingly enough, buying stocks that pull back after a big run might in fact be great stocks to buy, provided they consolidate for 3 weeks or so on lower volume. This means that institutions aren’t buying, but they aren’t selling too much. If the volume picks up again as the stock rises, it means the institutions just paused for a brief period of time and now they’re buying again.
You should usually not take the opposite advice and say “if I should avoid stocks at 52 week highs, I should buy them at their 52 week lows. Nope. The reason is, if a stock is at a 52 week low there is generally a reason, and if the company isn’t making money, it doesn’t matter how much selling pressure there is and if the stock is bound to turn sometime, because if a company is going bankrupt, there’s 0 chance of the company paying a dividend, and that means that any movement in the stock is just foolish gambling. You can’t bet on a stock recovering. Many get hit and never come back. There are plenty of actual reasons behind this such as not getting enough investor capital to pay for the debt just to name one example. If you buy a stock at a 52 week low you are playing a dangerous game and unless you really know what you are doing such as projecting earnings into the future and figuring earnings per share and what the stock could yield in the future and you plan to hold for long term, you may be in trouble. Avoid bad stocks.
Tags: stocks not to buy, stocks to avoid, stocks to buy, stocks to sell
