When you give entry points (price/volume) for trades, which do you weigh more -- price or volume? For example, [at 2:07] one of the plays was at the buy point ($8.85), but projected volume would only be approx. 216K shares (target volume is 270K). The projected is based on the volume as of 1pm EST of 108K. Do both have to fall in line, or above? Or, under what circumstances (up market, etc.) would you enter a trade where BOTH targets (specifically volume) are not satisfied? (March 8, 2003)
A good question in the mechanics of when to enter. It so happens that we were watching the stock because it had made a good price move and volume as you noted was looking solid. The reason we had not entered before that time was the price action. The stock had hit higher mid-day but had pulled back to test the move. Now volume was not exactly on target, but it was going to be in the ballpark. That is good enough as volume is not an exact science; you want to see a good, strong volume push thru the buy point. Thus we were looking for the stock to start another move up out of the early afternoon pullback and lateral move. When we saw that occur that was enough to enter positions. As it turned out volume was solid as volume acclerated in the last hour.
We always prefer to see both parts of the equation falling into line. In this market and particularly with upside positions, we want to see the move show it has some staying power. What looks good early can look like roadkill by the close. You may have noted that we are much more active in the last hour than the entire prior session given the market's intraday and day-to-day volatility. This gives us a much better picture of the real strength behind any move. Some stocks can run away from us, but in this market it is very risky to jump on a stock rallying sharply early but on light volume. As seen with many stocks, you get an early run that backs off intraday. If it it going to hold, it will rally again later. That sets us up in a good position for a further follow through on that move that gets the breakout underway.
There are times we will take early positions when the price is hit but volume is lagging. If the market is showing a good trend (an established trend of more than a day or two) in the same direction of the position we are taking and the stock is breaking from a soild pattern we will take some partial positions on that move. If it turns out to be a solid move we can add toward the end of the session on a pullback or even a session or more later when it successfully tests the move (pulls back to test support and then starts back up on rising volume). This illustrates the point that tends to get lost in entering positions: there is never just one entry point. Good stocks in good trends will give you several opportunities to make that first buy and then subsequent buys when you add to a strong stock. We love to add to winners. That is much easier than going out and finding another stock to do the same, and it is easier to manage. Jack Bogle would cringe to hear this concept of focusing your money as opposed to spreading it out over many stocks. If you have a winner and it continues to perform, why not ride that horse as far as it will take you?
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