ABB India recorded yet another session of a strong gain. It rallied 5.3% today on the back of heavy volume. The stock has zoomed 15% in the last five trading sessions. This power and automation technology firm has increased buying interest following the Global Mobility Summit on last Friday.
GNA Axles found favour with investors for the second straight session. After rallying 5.5% in yesterday’s session, the stock followed up with a gain of 4.1% today. It closed marginally below its 50-day line and 30% below its all-time high of Rs 579.
The reason we emphasize fundamentals is that we know from our historical market studies that the biggest winning stocks have certain, strong fundamental characteristics with respect to earnings growth, sales and profitability when they begin their big moves to the upside. When a stock tops, however, often times the fundamentals are still quite strong. Investors who overemphasize the fundamentals and ignore the technical action of the stock as it tops will likely run into trouble because stocks indeed discount the future. So, when a stock is just beginning a run, we know what the fundamental and technical characteristics must be according to our model studies, and so we emphasize both. At the top, however, we begin to look for technical clues that a stock is topping based on the fact that most stocks top while the current fundamentals still look good.
International Paper recorded another session of strong gains as the stock rallied 8.2% and scaled a new high. The stock has seen rising accumulation since August and has advanced 83% on YTD basis.
One highly dangerous investing approach all investors in growth stocks ought to think over is averaging down.
This approach means buying a stock, watching it drop and then buying more shares, with an aim to lower your average buy price.
It is one of the biggest myths in investing, particularly for high-growth companies. Don’t confuse it with the cost-averaging method of long-term investing in a mutual fund or broad-based equity ETF. Continue reading “Should You Buy Stocks on Dips?”
