This Stock Just Pulled Back – And I’m Buying More
This AI-winner is a clear buy...
Everyone always asks me, “When’s the best time to buy a stock?”
The answer? It depends. Every entry and exit is unique, influenced by a variety of factors. While there are certainly patterns and setups I look for, no two situations are exactly the same.
If you want to be a great investor, you need to embrace this uncertainty. Nobody knows for sure what will happen. But in bull markets like we’re in right now, surprises tend to come to the upside. We’ve captured a lot of this upside so far, as the TikStocks Portfolio is +55% in the last year:
But while all setups are not identical, there’s one I’ve found to be incredibly reliable.
And right now, one of our positions fits it perfectly.
Understanding Stage Analysis
When you're looking for a stock to buy, the first thing you need to identify is the primary trend for the stock. To do this, I use something called stage analysis.
In his classic 1988 book Secrets for Profiting in Bull and Bear Markets, Sam Weinstein laid out the “stages” of the market cycle.
Stage 1 of a market cycle starts at the end of a stage 4 downtrend. This is known as the “base building” process.
Once a new uptrend is formed as prices break above the 30-week (or 200-day) moving average on strong volume, the market moves into Stage 2.
To find stocks moving from Stage 1 to Stage 2, we’re looking for the following:
Share prices that have been moving “sideways” for at least six months
Share prices that have crossed above their respective 200-day moving average
Share prices where their respective 200-day moving average (MA) has “flattened” and started to shift upwards
Share prices that bounced back quickly and fell less during the 2022 bear market
A good example of an index current in a Stage 2 uptrend is the S&P 500, which we hold via a position in the SPDR S&P 500 ETF (SPY):
We can see it's in a Stage 2 uptrend because:
The 200-day MA is upward sloping
The 15-and-50-day MAs are upward sloping above the 200-day MA
This is a very "clean" market structure. And when a stock is in a Stage 2 uptrend, the best time to buy is when it pulls back in the context of this uptrend. Typically, I look for periods when the 14-day relative strength index (RSI) is at 50 or below. You can see when those buys would have occurred here:
In short, we want to be adding to positions when they pull back in the context of a primary Stage 2 uptrend. We've done this a lot in the last two years, which is why the TikStocks Portfolio is currently +55% over the last year.
And right now, there's one high-conviction portfolio position that's pulled back in the context of a Stage 2 uptrend. Since it's only a 1% portfolio position, I am happy to upgrade it today.
Adding to a High Upside Position Today
The stock I'm referring to is…