This question is a good one that follows on the heels of yesterday's post, Never Chase the Signals.
As a reminder to anyone new here on the Rule #1 blog — the Archives (you can get to them via the side bar) are a wealth of info. If you're looking to learn more about how to use the MACD, MA and Stochastic, be sure to read through every post in the index called The Three Tools.
Now, onto the question:
Phil, if one misses the trigger point, but the 3 tools still say buy and the price is still below MOS (and you've done all the other homework, of course), do you buy?
An example here is Lowe's. I missed the price crossing the
30 day MA about 3-4 days ago, which was the last of the tools to signal
'buy'. The price has gone up $1/share in that time. That would make
me emotionally think this is not the time to buy it.
What do you do?
How long does a "buy" signal last after the triggers have been crossed
(days, % of price, not at all)?
I'm assuming one wouldn't ask the same question on the 'sell' signal.
If I miss the trigger, I'd be inclined to get out, regardless of how
many days I missed it by. True?
Thanks for your help,
Here is what I told Deb:
Especially in this volatile market it is best not to chase a signal
that you missed.
However, if the price drops back to the Moving
Average and doesn't break through and the two bottom signals stay
green, I'd jump in there.
Your only other choice is to shift to a
longer term signal, like a 50-day, and then use that to move in and out
with. The point is to be consistent so you don't get all emotional and
start chasing yourself. And the key is to always be investing in a
wonderful business that is on sale. If you do that right, you will do
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.