(By Greg Guenthner) There are two important reasons you should watch the charts I'm about to show you.
Charting is the only tool that can answer the two most difficult investing questions: when to buy, and when to sell. A quick analysis of the following charts can pinpoint the best time to invest. And they can tell you when you should take profits (or cut your losses).
You can have a great investing idea. You can spend hours on your research. But if you don't know when to buy and when to sell, you'll never consistently make money in the stock market.
I've told you many times before that even if you are a long-term investor, you need to add basic charting techniques to your fundamental arsenal. Breaking down a stock's chart takes just a couple of minutes. You can make the annotations on your computer, or you can print out the charts and mark them with a pencil and ruler. Three minutes of work can save you from making a mistake that would potentially cost you thousands of dollars.
Today, I'm going to take a quick look at a couple of the charts you've sent in over the past several weeks. I'll then tell you whether the stock or sector is a buy or sell.
Let's get to it…
Curious what your thoughts are on gold and silver stocks like EXK…
–C.L.
In this example, I want to take a much wider look at Endeavour Silver Corp. (NYSE:EXK). So I'm going to show you a weekly chart:
Pulling up a weekly chart is a great way to look past much of the shorter term "noise" in a stock's price. It's especially useful if you're planning on holding a position as an investment for a longer time frame.
Taking a look at EXK, we can draw clear long-term support at approximately $7.75 (dotted blue line). Notice how the stock respects this key support area. After breaking higher in early 2011, the stock fell back to support several times–yet never ended a week below $7.75.
Using this information, you know that you can safely buy near this support zone if you are bullish on silver and EXK. Simply set your stop loss just below support to protect your investment. If you are looking at a shorter-term investment, I would want to wait to see if the stock can surpass recent highs at $10 before jumping onboard.
What is your opinion on CLB, which as of late lost a lot of ground? I have been in it for a long time and wonder if the stock is running out of steam.
–A.D.
Your assessment that Core Laboratories (NYSE:CRB) has run out of steam appears to be accurate:
Here's another situation where a simple trendline would have been a great warning sign that it might be time to sell…
The stock broke below uptrending support (blue line) in late May. From that point, it continues to make lower highs–all marked with red arrows on our chart. Even after several days of recovery, it has not surpassed its mid-July highs or $116. Until this stock shows us that it is in the process of bottoming, it would be wise to consider that it will probably continue to move lower…
Keep sending all of your charts, tickers and trading questions to editor@pennysleuth.com.
Sincerely,
Greg Guenthner