NV, stance is exactly right - How long do you have - It is about the balance of probabilities being loaded in one's favour (or lining up the ducks). It depends upon the trading/investing timeframe. If one is a longer term investor then the entry point doesn't really matter all that much. It is more about fundamanentals and some simple analysis. i.e. is it going up or down with a long term perspective of say weekly or even monthly charts.
For shorter time frames ie. days/weeks/months or longer an assumption (for going long) is made that the price is going to go up. So why would one buy the share if the price is going down or signals that it might be going down. Doesn't make sense. Just because something is cheap or cheaper than it was doesn't mean it isn't going to get cheaper i.e. continue falling. Worst case is the pullback in that uptrend that looks like a cheaper entry point actually becomes a full blown reversal.
In about 60 or70% of cases a retracement (dip) in an uptrend or rally in a downtrend will resume in the direction of the preceding trend (up or down) but obviously not all of the time. So how does one increase the probability of getting the entry point right? Then wait in the case of a prior uptrend until there is evidence of the dip bottoming and turning back up in the direction of the preceding trend. An often used method is to wait until the high of the preceding day is taken out before buying.
However the preceding is a grossly simplified description of what it is really about. You might have seen me in posts talk about support and resistance and this is really important and has to be woven into the probability factors. This is about de-risking the entries as much as possible so that the potential losses if one gets it wrong are minimised. Simply if one is to buy then it is better to buy close to a support level where the odds of the entry point holding are much higher. Conversely the further the entry point gets above a support level and progressively closer to an established prior resistance level the odds of another pullback or reversal steadily increase.
Applying this to DNA right now we can see the price is in a channel where it is pretty clear that 95 cents is strong resistance. Forget about the hype, assumptions and conjecture but it tells me looking at the chart that it has just as good a chance of reversing and returning to support at 90 cents as breaking through resistance and going above 95 cents.
If I bought now it could go back to 90 cents, in fact today the price action formed an as yet unconfirmed bearish candlestick Harami pattern. If it breaks through 95 cents and holds, then 95 cents switches from resistance to strong support and I have a great support level entry point with a much higher chance of it going up and a place to place a stop fairly close to the price action at a lower risk.
The preceding is only scratching the surface of a very complex subject. Please don't take any of the above description as anything other than educational information nor my thoughts on what might or might not happen with DNA as advice. All of this is conjectural and nobody can predict outcomes, least of all me.
Do your own research and make your own decisions
DNA Price at posting:
93.0¢ Sentiment: Hold Disclosure: Held
