The markets are experiencing a bullish run higher in price since they bottomed in June of this year.
Some folks get nervous opening up a new option trade or even investing in securities believing the market has already run as high as it will, and they freeze sometimes thinking they missed the move.
The question then is, so you are waiting for the markets to be in a sell off and trading lower before you take action? Isn’t it also possible one freezes thinking they can’t buy now because the markets could trade even lower?
Jump on a Strong Stock’s Bandwagon
With information comes confidence. There is a strategy for investor’s that we, as options traders, look at in our analysis and that is the strategy that looks at stocks trading at their 52-week highs and anticipating further higher price action.
It’s like trying pick a major league baseball team to follow and root for.
If you don’t already have a favorite team it isn’t unheard of to see people pick the team that is hot right now. It seems safe to start rooting for the team in first place and winning almost all their games.
Die hard fans of baseball and those that have a favorite team look down on folks that do this calling them Bandwagon fans. They say it as a derogatory term as if that is a wrong thing to do.
Hey, we aren’t here to please others and we can root or who we want and why we want. Same thing with stocks. This strategy says find a hot, top performing stock and ride its coattails while they are performing so well.
Stocks and their 52-Week High
The premise of buying stocks at their 52-week high and invest in or trade it.
The founder of the Investor’s Business Daily William J. O’Neil popularized this approach.
The expectations for the stock can eb whatever you decide, but the last we remember the consideration given with this approach is look for up to a 20% gain an if the stock drops say 8% consider exiting.
My online options analysis tools (www.tomsoptiontools.com) can search up stocks at their 52-Week Highs or Lows.
Log in and do this sequence: Stocks > Stock Analysis > Hi / Low
Set the Wizard (scan) choice to Stocks with Latest Highest Close for Weeks Chosen
Type in 52 and then click Search
Here is the list at the time of the writing of this piece:
Be Prepared Should the Market Start Selling Off
It’s hard to pick tops (and bottoms) in the market. Costly, too. Don’t count on thinking you will be able to do that and know that you may miss the top, but still be able to manage your investment and trades well.
When you see a series of lower high price pivot points and lower price pivot points then the markets are softening up and that may be an appropriate time for you to consider scaling back buying and maybe even consider locking in profits/
Do you invest or trade options? Work with your broker for what you all feel is best for your portfolio and act accordingly.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
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