When you talk about buying aggressive point like on MCTR 8.40, is this at the 18 day MVA and is the next [buy point] at 9.57 a break above the 200 day SMA? Also you mention that you wait to buy usually after the first hour of trading; is this a good rule to follow, and do you ever buy pre-market? (December 29, 2001)
There is not any set 18 day MVA or 200 day MVA label on buy points that are called aggressive or breakout. When we use the aggressive label, the stock is usually making a test of a recent move and is starting up off of the support; it is more aggressive because the stock still must clear that recent high to make a really good move. With MCTR it had made a strong move in early December and then pulled back to the 18 day MVA, bounced higher and then moved laterally until it ran into that level again and bounced on very strong volume Thursday (when market volume overall was still low). It was aggressive because it was still below the December high (the high point in the handle), and a move can fail before it ever breaks out. Still we liked it enough that we wanted to catch the bounce up off the 18 day MVA. The next buy point was over the handle high, the true breakout of the pattern that started back in January of 2001.
We usually do wait to buy into positions until a half hour to hour has passed unless we get some news that we really like (e.g., company raises its owns earnings outlook). If a stock gaps up or down on that news, we still won't go out chasing it, but will wait and let it come back to us. That is usually why we wait. The first half hour to hour market makers, specialists, buyers, and sellers are in a tug of war to see what the direction for a stock and the overall market will be. Strong opens usually lead to a pullback to at least test the move, and weak opens give rise to good moves a bit later. We don't want to be the guinea pigs in setting the price for the day. Let it get a bit established and then move in when we see the direction. As for buying pre-market, we will do that when we have the kind of news we want and can still get what we feel is a reasonable price. The problem with the pre-market is wider spreads and fewer participants, so it is hard to get a real handle on what the stock will do; if the news is good, the stock may be up $2, but then pullback to test that move in the first half hour to hour of the regular session. Again, we are acting as the guinea pig.
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