“What seems too high in price and risky to the majority usually goes higher, and what seems low and cheap usually goes lower.” – William J. O’Neil, MarketSmith Founder
The ‘N’ in the CAN SLIM strategy stands for either a ‘New Product,’ ‘New Management,’ ‘New High,’ or any other new factor, which could positively change the operating environment for the stock and ultimately drive its price into newer realms.
We would like to specially draw your attention to buying into new highs. Buying a stock when it is scaling new highs might seem strange and scary to many investors. About 98% of individual investors would never buy a stock that makes new highs. Buying a quality stock at a new high is buying into the emerging strength with a belief that it could prove to be the beginning of the next big move.
Rather than buying every stock that makes a new high, make sure that the stock breaks out of a sound base pattern before it sails above the pivot, on a volume at least 40% higher than the average. Investing when the stock price is way too extended, say 5-7% or higher from its pivot is not ideal as well.
From our portfolio, 21 out of the 28 stocks are trading less than 7% from their all-time highs. These represent a whopping 75% of our recommendations.
Traditionally, investors often believe that they are value investing, when they prefer to shop stocks near their 52-week lows. The idea of buying from a discount sale in a supermarket rarely applies while buying stocks. Stocks on the new-high list tend to go higher in price, while those on the new-low list tend to go lower. Good quality products are always expensive, so are the good quality stocks.
To continue reading, Buy Premium Access