The Sweet Spot to Buy Apple and Facebook.
It's hard to buy the dip when stocks keep rising, and this summer's rally presented a good example of that. Then when the pullback finally arrives, some traders are too scared to buy. This is due to the lack of a solid game plan.
Today we're going to look at a game plan that could be used to buy the current dip. What is the sweet spot for buying two of the most popular stocks in the market right now? Let's go to the charts to find out.
First up is Facebook (FB). This stock broke out of an inverted head and shoulders pattern (L-H-R) in early August, and proceeded to run from $248 to $304 in just one month.
Now that the stock is off its highs, what's the ideal price to buy? $248 per share was the breakout price, and Facebook should find strong support at that level. Traders should limit their loss if the price breaks below $209, the which represents the low point of the inverted head and shoulders.
Next up is Apple (AAPL). This stock's uptrend is still intact, according to its bullish trend line (blue). Notice how Apple's 50-day moving average, in red, runs parallel to that trend line.
The plan here is to buy Apple at the 50-day moving average, currently near $107. Note that Apple's RSI (relative strength index) has dropped out of overbought territory.
The further stocks fall, the more attractive they become. Having a plan and knowing that you're going to stick to it mitigates many of the negative emotional aspects of trading. This means traders need to learn how to create a plan, and also must have the discipline to follow the plan.
Is there a stock, commodity, or currency you'd like to see analyzed on Ponsi Charts? If so, feel free to leave a message in the comments section if you have a request.
Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.