Phillips 66 (PSX) is at an all-time high…. Time to buy? (January 02, 2013)
PSX
Good evening Dan here on Wednesday, January 2nd, first trading day of the year, and looks like we got off to have to a pretty good start. I want to look at Phillips 66 ( $PSX Phillips 66 ) and here’s why. First of all we’ll look at present day, the stocks up, two big days in a row, and you can see the Bollinger Bands, which had been pretty narrow here, now starting to widen out, so this is coming out of a volatility squeeze, probably got more upside. I was just posting today, in our premium sites, about the three-day rule, and I think that applies here. The three-day rule, it’s really a rule of thumb, is this, on the first day of a move, guess who starts that? The big money that’s big enough to start a move, and it’s the smart money. Why do we know it’s smart? Because big money’s smart, if it wasn’t it wouldn’t be big money, would it? So that’s the first day, which was here on Monday. Then the second day is the semi-smart guys, the guys that see what’s happening here, not quite so smart to jump on the first day, so they get on the second day and they buy and this pushes the stock up here. Now, we’ve got the smart, and the semi-smart money already in this stock, who do you think that leaves to buy? Well, let’s see, we’ve got a couple days ago, on the 28th, we had the stock 9 percent below where it is right now. Who’s going to wait and see a stock move about 10 percent before finally believing that the move is real? That would typically be the guy that buys high and sells low, don’t be that guy. Here’s how you do it; look and see where it’s been right to buy before, where it’s been right to buy is on these pullbacks to the 50-day moving average. Where it’s not been right to buy is on these tags of the upper Bollinger Band. Now, here’s an exception though, you could still buy here and the stock would have drifted higher but then, ultimately, what happens? Well, we got back down to this point, you draw a line right around here, and what do we have? Well, we’ve got a second bite at the apple; we got a second chance to buy this. Similarly, on this breakout, we buy up here; what happens? You’re a winner, but what could have happened first? You could have got a better opportunity to buy the pullback. My point is, here, this was the opportunity to buy the pullback. Now you can say, “Well Dan yeah, but it didn’t tag the 50-day moving average.” Dude! If trading were that precise, don’t you think we’d all be pretty rich? You have to take your shot as you find it, and the point is you wouldn’t have even had to buy on this down day. If you’re watching this stock, and I hope you are, and if you set a price alert, you let your software alert you to the fact that this day here, on Friday the 28th, that was close enough to the 50-day moving average, okay, fine, so then set price alert and make it so that you get tipped off either when the stock moves above the open here, on the 28th, which is $51.06, or make it even $51.50. When the stock basically engulfs this prior days intraday high, then you can buy the stock, so you’re actually getting in on the day the smart money’s getting in as opposed to on the third day when, I’ll say it, the dumb money is getting in. Okay, so this is one way that you can put yourself on the right side of the trade, and that is simply to watch a stock as it nears a good buy point. Now, if it’s right at a good buy point don’t watch it, buy it silly, but as it nears a good buy point, if you’ve been looking for an opportunity to get in, then watch this stock as it nears a good buy point, set some appropriate alerts, again just based on the prior days open or intraday high, it’s a little bit safer, and then when you see that happening you say, “Okay, well I know where the smart money is, I are one, I think I’ll be in there too,” so you go ahead and buy the stock. So now at $55.26, are you going to buy it tomorrow? You could, frankly you’d probably make money on it because a lot of times the squeezes go farther and faster than we think they will, but it’s risky to buy a stock that’s up 10 percent in two days. I think what you do is, you wait for the stock to come back a little bit, this is an aggressive trade, if you want to buy it right now you can, and again you’ll probably make money on it, but it’s an aggressive trade, the better trade is to do what? To wait and buy when it’s been right to buy before, very close to the 50-day moving average. Okay, that’s it; members get over to the Strategy Session, a lot of stocks to cover. Free Chart