Why do you wait to buy stocks until they rise to a certain point? Wouldn’t it be better to buy that stock at the lower price it is trading at, thus getting the benefit of all of the move up?

A lot of the stocks we are looking at are developing into good plays. While we may like the move we are seeing, until the stock proves that it is going to make the move, it is subject to failing. We watch for signature patterns that we like. These have proved themselves over and over to us. If the stock can complete the pattern, it has a better percentage chance of moving up. This often involves breaking above resistance on strong volume. If it occurs, the moves can be great. If you buy before the break, anticipating the move, you could get a little move to the resistance level, and then have the stock fall back on you if it cannot break resistance. Or, the stock just tanks on you. If you are buying this way, you are guessing at tops and bottoms. The stock has not shown us its mettle. To us, the stock has to prove itself worthy of being bought. We only want to buy strong stocks that are going to continue to move up, and to do that they have to be strong. The little gain we miss out on waiting for a stock to complete a pattern is usually small potatoes compared to a strong breakout. We don’t try to capture 100% of the gain; again, that is guessing at bottoms and tops. We see the move on the volume we want and then we get in and try to capture as much of the gain as we can. This greatly increases our odds of winning on plays versus just buying and hoping the stock will break resistance. We would rather capture 50% to 60% of the move on six stocks than a 100% move on one stock and a big loss on another stock that failed attempting to break resistance.