Buy low, sell high.
For decades it's been a market mantra. Buy a stock just as it hits bottom, sell at its peak, and you'll get rich quick.Too bad it's not that easy. No one can know for sure when a stock will hit bottom. As a general rule, stocks and markets that go up tend to keep going up while those that go down tend to keep going down.
The result? Try to buy a falling stock, and you'll usually get burned.
Consider the reasons for a stock's descent. In many cases, a stock that falls is merely following the lead of the broader market. Since three out of every four stocks follow the major indexes' lead, buying in a bear market is a recipe for disaster.
A stock may also fall if the company runs into hard times. A younger, hungrier rival may grab market share. Its core product may become obsolete. The economy may go into a downturn, hurting the industry.
Sometimes the reasons for a decline can be more benign. No stock can go up forever, and yours may simply be forming a new base.
But you can't accurately predict exactly when the stock will hit the bottom of its base and surge back up.
research shows that the best combination of upside potential and lower risk occurs when a stock breaks out of a sound base. Rather than buying on the way down, buy only during breakouts and you'll increase your odds of success.
regards,
Pravin
