Price matters most in volatile markets

Some investors will be tempted to make bad decisions, while smart investors focus on price.

By Stock Traders Daily Jan 14, 2014 6:01PM

Image: Woman reading newspaper in livingroom © Tetra images/Getty ImagesBy Thomas H. Kee Jr.

When markets act as sporadically as they have been this week, some investors are going to lose focus, they are going to become emotional, and they are going to make bad decisions. 

That is very typical, and it is not just limited to decisions to sell, but ill-timed decisions to buy are also common when the market is as wild as it has been lately. 

However, this all can be avoided by simply looking at price, so this article focuses on the price action of four stocks that our subscribers were alerted to in the middle of Tuesday's session. These stocks were testing either longer term support or resistance, and poised to move based on their ability or inability to hold these inflection levels.

People want to know what they should be doing with their specific stocks, so this is what we will focus on. We have a set of rules we follow at Stock Traders Daily, and those rules are based on one important thing. 

We care about price because price is all that will make us money in the market. As much as we might love a product, expect solid earnings, or embrace management teams, the continuous theme is that price is what matters to making money in the stock market, so the stocks below are being evaluated based on price.

Chesapeake Energy Corporation (CHK)

Trading Report

Testing longer-term support

Autodesk, Inc. (ADSK)

Trading Report

Testing longer-term resistance

Oracle Corporation (ORCL)

Trading Report

Testing longer-term resistance

Aetna Inc. (AET)

Trading Report

Testing longer-term resistance


Our rules tell us that stocks like CHK, which are testing support levels, could be candidates to buy, while stocks that are testing resistance like ADSK, ORCL, and AET are much likely better to sell. I don't want to oversimplify the rule, but for the layman out there we want to buy near support, and sell near resistance levels, and those are defined for us by watching price.

According to our immediate observations of the stocks in this article, most of the stocks highlighted in our observation Tuesday had been testing resistance; so far more of them were flashing "sell" signals than "buy" signals. In fact, the ratio is 3-to-1 "sell" to "buy."

If you are looking to make money in the stock market do not be confused by the wild swings in the market recently, but don't take your eyes off of the ball either. The recent moves can confuse some people, but if you just pay attention to price you should be just fine.

Jan 16, 2014 10:27PM
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