The following strategy outlines the technique of buying stocks on technical breakouts. Although this is one of the most basic investment strategies, we found the need to outline it for the less experienced investor who may be buying into a stock for the wrong reason. Many times if you ask a new investor why they got into a stock the answers can be quite unbelievable, ” I like their food, I shop in their stores, a friend told me it would take off, etc.”. If you are buying a stock for any of these reasons you might as well hang the financial section of the newspaper on the wall and throw darts at it.
If by chance you happen to make money on this type of trade, trust me you were lucky and chances are that the stock gods will take the money away from you on your next trade. Investing is serious business, and if your going to put your hard earned money into an investment you had darned well better be basing this decision on a technical or fundamental characteristic of the stock and not on a prediction form the guy down the block. The next time the guy down the block recommends a stock to you, ask him how much money he put into it and why exactly he thinks it’s worth buying.
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