(By Greg Guenthner) If you don't perfectly time your stock purchases in this roller coaster market, you risk quickly losing a big chunk of your investment.
There's nothing worse than buying a stock and watching it move sharply lower — even if you plan on holding for the long-haul. Today, I'm turning to some of the more manic stocks you've sent in for review. I'll then use these examples to help you find ideal buy prices.
Let's get right to it…
I am thinking about purchasing PhotoMedex Inc. (NASDAQ:PHMD) stock. By looking at the charts it seems as though it is a good time to buy since the support seems to be around $10.50. What do you think?
— T.J.
Here's a look at a daily chart:
PHMD endured a nasty downtrend that took the stock from $19 in mid-May to less than $11. I agree that you're lowest support zone on this chart is near $10.50. But there are three other price points to watch: $11, $12 and $13 (green lines).
For a longer-term holding, an $11 entry would be ideal. But you have to be patient and assume the stock will drop back toward where it initially broke free from its downtrend (red line).
If you are a short-term trader, you could wait for a smaller pullback toward $12. If you look back at early June, you can see there was a lot of buying around the $12 area. If the stock retraces $12 and holds, you could easily enter a low-risk trade on the long side.
Finally, if you are a more aggressive trader, you can look for this stock to break above $13. PHMD has consolidated of two days after its initial push through $12 and $13. If it breaks out above $13, it could have room to run toward the next resistance level at $15.
Above all, be sure to use tight stops for all of these scenarios.
Could you comment on Great Wall Builders Ltd. (OTCBB:GWBU)? I think it is under heavy accumulation now in this 1.50 to 1.75 range. It looks to me as if it is ready to breakout to $3 or so. What do you think?
— R.M.
Here's a look at GWBU:
Under normal circumstances, you might have a chance at buying this stock on a retracement to $1.40 or a breakout above $1.80.
However, GWBU appears to be a heavily promoted stock. I would not trust the chart or any "reports" you might find on the web touting this company. Stock promoters could be manipulating the price — and you could be left holding the bag if you buy here (or at any price, for that matter).
Steer clear of this stock. If you own it, you should sell while you can…
Is it safe to buy casino stocks yet?
— J.K.
Let's use a chart of Las Vegas Sands Corp. (NYSE:LVS) as a proxy for casino stocks:
LVS is showing signs of bottoming — but it still might be too early to buy casino stocks…
I like how LVS reversed course after briefly dipping below $42 (blue circle). I also like how it finally broke out of its sharp downtrend. However, casino names can be volatile, so it's important to wait for confirmation that the buyers are back in control.
Waiting for a breakout above $48.50 on strong volume would be a prudent move for traders. The stock has already run into selling at $48 in early June. If it can move higher from there, you can expect more upside action.
Keep sending all your tickers, charts and trading questions to editor@pennysleuth.com.
Best,
Greg Guenthner