Look at these stocks in the industrial sector that are doing some heavy lifting. (February 03, 2017)
This is not a perfect pattern but it is a low-risk buy point, and this is why: Because again, you have got the squeeze. You have got the breakout. And then you have a pullback, that so far it is like holding right in the middle of this level. The 50-day moving average works, but it is really this area here that I am looking at. You make a speculative buy at this point with a stop just a little bit below here. So you haven’t risked very much money and in return you are looking for this kind of move for a continuation pattern.
So lets look at a couple stocks in this sector. You will see, I like this ( NYSE:IR ) in the XLI ( NYSEARCA:XLI ), but I like this better than the XLI ( NYSEARCA:XLI ). Earnings aren’t an issue, they don’t report until the end of April. So you are buying, you are keeping a stop right around there. Low-risk buy point and then you are adding to the position that gets above 81.00 or so.
And then just one other one, and that is General Dynamics ( NYSE:GD ). Aerospace, we love Aerospace and Defense, two of my favorite things if I am looking for missiles, rocket launchers, or airplanes. So we get a breakout here. Boom! There it is. And now we are getting consolidation and another move on Friday. So where is resistance? It WAS right here. Now, where is support? Well, that would be right here. Same thing. So you are buying this stock, you keep a stop just a little bit below this level here, and then you are in at a low-risk time. Low-risk entry, where if the stock reverses and you are wrong about the trend, the trend is over as opposed to continuing, you haven’t lost a lot of money. But if you are correct and the stock does move higher you have a lower cost basis.