JS-Masterclass #6: The Perfect Buy Point
The Perfect Buy Point
A Perfect Buy Point represents the completion of a stock’s consolidation and the potential start of its next advance. After a base pattern has been established, the Perfect Buy Point is where the stock establishes a price level that will act as the trigger to enter a trade.
When a stock’s price level moves through the Perfect Buy Point, there is a high probability that this represents the start of the next advancing phase.
You can also call the Perfect Buy Point a “call to action” price level – it is the optimal buy point.
In the context of a stock’s Volatility Contraction Pattern, a temporary pause (also called a base building process) allows you to set a buy stop to enter a trade. You want to buy as close to thePerfect Buy Point as possible without chasing the stock up more than 1.0%. In this context, the use of buy stop limit orders is recommended.
As a solid consolidation process and the formation of a Volatility Contraction Pattern are needed before a Perfect Buy Point can occur, The Perfect Buy Point can also be considered as the line of least resistance. A stock can move very fast once it crosses this threshold. When a stock breaks through the line of least resistance, the probability is high that the price level will move much higher in a short period of time.
This is the case because this represents an area where supply is low. Therefore, even a small amount of demand can move the stock higher.
The importance of the Volume at the perfect Buy Point
A Volatility Contraction Pattern is needed before a Perfect Buy Point can develop. As explained earlier, supply will stop coming to market at the ed of a valid Volatility Contraction Pattern. This is why we want to see the Volume significantly come down in the day or the couple of days before the Perfect Buy Point develops.
Now, with only very little supply of stock in the market from sellers, even a small amount of buying can move the price up very rapidly as the price level moves through the Perfect Buy Point.
In the ideal case, this move through the perfect Buy Point occurs under heavily increasing volume. This might be an indication that big institutions are putting their big money into the stock.
When all of this comes together, you want to place the order as close to the Perfect Buy Point as possible.
Always wait for the price level to move through the Perfect buy Point!
Some traders will try to get in before the breach of the pivot point to save a few pennies on the trade. Assuming that a stock will break out is dangerous and the breakout may fail. Be patient!
Remember
Even if you respect all these technical requirements of a Perfect Buy Point, you will still get stopped out and incur losses.
BUT: Trading is all about probabilities…respecting these rules will increase your probability to enter profitable trades and significantly outperform other traders and increase your chances to be consistently profitable in the market.
A Perfect Buy Point represents the completion of a stock’s consolidation and the potential start of its next advance. After a base pattern has been established, the Perfect Buy Point is where the stock establishes a price level that will act as the trigger to enter a trade.
When a stock’s price level moves through the Perfect Buy Point, there is a high probability that this represents the start of the next advancing phase.
You can also call the Perfect Buy Point a “call to action” price level – it is the optimal buy point.
In the context of a stock’s Volatility Contraction Pattern, a temporary pause (also called a base building process) allows you to set a buy stop to enter a trade. You want to buy as close to thePerfect Buy Point as possible without chasing the stock up more than 1.0%. In this context, the use of buy stop limit orders is recommended.
As a solid consolidation process and the formation of a Volatility Contraction Pattern are needed before a Perfect Buy Point can occur, The Perfect Buy Point can also be considered as the line of least resistance. A stock can move very fast once it crosses this threshold. When a stock breaks through the line of least resistance, the probability is high that the price level will move much higher in a short period of time.
This is the case because this represents an area where supply is low. Therefore, even a small amount of demand can move the stock higher.
The importance of the Volume at the perfect Buy Point
A Volatility Contraction Pattern is needed before a Perfect Buy Point can develop. As explained earlier, supply will stop coming to market at the ed of a valid Volatility Contraction Pattern. This is why we want to see the Volume significantly come down in the day or the couple of days before the Perfect Buy Point develops.
Now, with only very little supply of stock in the market from sellers, even a small amount of buying can move the price up very rapidly as the price level moves through the Perfect Buy Point.
In the ideal case, this move through the perfect Buy Point occurs under heavily increasing volume. This might be an indication that big institutions are putting their big money into the stock.
When all of this comes together, you want to place the order as close to the Perfect Buy Point as possible.
Always wait for the price level to move through the Perfect buy Point!
Some traders will try to get in before the breach of the pivot point to save a few pennies on the trade. Assuming that a stock will break out is dangerous and the breakout may fail. Be patient!
Remember
Even if you respect all these technical requirements of a Perfect Buy Point, you will still get stopped out and incur losses.
BUT: Trading is all about probabilities…respecting these rules will increase your probability to enter profitable trades and significantly outperform other traders and increase your chances to be consistently profitable in the market.
Combing the BEST of two WORLD's: Cathie Wood & Mark Minervini
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