There is something very confusing to me that needs some attention. Two nights ago you said safer buy on EXDS would be over 67 with over 8 million shares. Yesterday it closed at 67 7/8 with 8.8 million shares. Last night's letter said the safer play was to buy EXDS at 73 with volume at 11 million shares. I am in at 54 but how come you don't say, now that EXDS went over 67 with 8.8 million shares, anyone that wanted to buy that stock should be in already. Instead you upped the buy price. I just don't get it. (August 31, 2000)
Good question. When a strong stock is making a strong move, we try to get in when it makes that first move. The break over the June resistance was a good point as was the break over the July high. We often add to positions of a winning stock as it moves up. There is not 'one' price to enter a stock and then lock it up and put it away. If a stock continues to prove itself on strong volume, breaking a resistance barrier, we then look to the next point we can add shares.
We want the stock to prove itself to us again that it is worthy of more of our money. If it again breaks resistance on strong volume, that shows us the stock is ready to go again. We look for those points. For one, we like to add to positions of winning stocks as we said. Also, not everyone hit that first buy point. There are multiple buy points on the strong moves up, and if you did not get in on the first one, that does not mean you cannot catch it at a higher price. We just look for points where the stock makes a milestone in good shape and is ready for the next big move up.
When we discuss not buying a stock over 5% or 7% over its break over resistance, that focuses on that particular resistance point. You can get whipsawed buying a stock too far over a breakout before it hits the next resistance. When it puts that resistance point behind it, you should then focus on the next good buy point if you want to augment your position. That is why we are talking about new buy points that we consider 'safer.' Those are breaks over the next resistance or a previous price high, and that improves our odds of success right after the purchase.
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