Achieving any goal with exceptional results starts with good planning. The IBD Methodology provides the framework for choosing the right stock at the correct time while applying proper risk management to lock in profits. And buying at the precise time can stack the odds in your favor for maximum gains.
First, make sure the general market is in an uptrend and the stock possesses sound fundamentals. Next, it's time to check the chart for a proper base, such as a cup-with-handle, flat or double-bottom pattern. MarketSurge pattern recognition identifies the most common bases and their unique buy points with buy zones shaded in blue.
A stock's buy point is a past high point where the stock found resistance after at least several weeks of price consolidation. Once a stock breaches a prior resistance level it may continue to climb higher.
What Is The Buy Zone?
A stock's buy zone, or range, is the base's buy point to 5% above it. Buying in this range allows for normal price fluctuations without triggering the 7% sell rule from your entry.
When the stock hits the buy point, or breaks out, it's time to buy as close to the entry point as possible. This stacks the odds in your favor for the most upside. Buying too far above the buy point risks smaller profits or getting shaken out early.
Once the stock has proved itself and risen 2% or 3%, shares can be added up to the top of the buy zone.
Another way to buy shares is on a pullback to a stock's 10-week moving average. When a stock runs up then retreats to its 10-week line finding support, it may bounce off the line and climb to new highs. Shares can be added at the price level of the 10-week average and up to 5% above it.
Meta Stock Shows How Timing Is Everything
In 2023, Meta Platforms formed a flat base with a 197.16 buy point and a 5% buy zone reaching up to 207.02 (1). The social media company reached the buy point on March 15 in above average volume.
Despite a brief pullback, Meta started a four-week climb before taking a longer break. The stock pulled back to its 10-week line, where it found support in heavier-than-average volume (2).
Shares eased for two weeks before starting a massive run. The stock gained 165% from its buy point to its peak of 326.20 in July 2023, without triggering a sell signal.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
