Time to Buy Stocks Say Charts

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The stock market has been flip flopping around for a couple of months now, so buying stocks has been fraught with risk and pain. Now, however, according to Oscar Carboni at least, the stock market is finally heading higher and it is time to buy stocks on the dips again.

Oscar Carboni is a day trader who has a site - http://www.livewithoscar.com - on which he publishes videos of his thoughts on the stock market and where it is headed, and whether you should be buying stocks on the dips or selling stocks on the rallies. Over the last few months he has changed his mind a few times - see Stock Market Today - but on March 16, 2010 he came down unequivocally on the side of the bulls.

According to Oscar we are now clearly back in a bull market and he even gave his prediction for where the S&P is headed this year,namely between 1290 and 1300 sometime this year (the S&P index is currently around 1160, so to get to 1290 would be quite a strong run and a bold statement to make - hats off to Oscar if he gets it right and hats off too for making such a bold prediction in the first place!).  So here is the video he made on March 16 with his stock market prediction.



But that is why I like Oscar, he is not afraid of sticking his neck out and making predictions about the stock market and what to do with regard to trading stocks or indices. Lately, as I said, he has been bearish then bullish then bearish again then bullish again etc... he was pretty bearish when the markets dipped down back in February but as the charts changed he was forced to change too. So he doesn't always get it right but he does base his trading strategies on what the stock charts and indices are telling him. This is, however, the first time in a long time he has made a prediction with a specific number 1290 to 1300 in the S&P sometime this year.

That doesn't mean we will get there in a straight line of course but it does have the benefit of being clear.

The other reason I like Oscar is that I am a cheapskate and he gives out lots of free stock market information (a bit like me in fact). His analysis of the charts is also pretty easy to understand, which is good for beginners to stock trading and charting.

If you are new to online stock trading then it really is a good idea to get to grips with at least the basics of stock charting and technical analysis, - moving averages, resistance and support, pivot point calculation etc... as the traders (and computers) who trade stocks for a living use stock chart signals to determine when they will buy stocks and when they will sell them. As far as I can see there are very few long-term value investors like Warren Buffett around, there are some of course such as Joel Greenblatt with his formula investing strategy who long-term investors can follow, but the vast majority of what happens on the stock market is based on money being shuffled around by short-term stock and index traders. It is these short-term traders that provide the volatility, if everyone just bought and held for 20 years like Warren Buffet does then there would be very little to talk about. But human nature being what it is, people are always in a hurry and actually prefer the movement caused by the online stock trading frenzy that is the stock market than watching paint dry. See also buy stocks online

So it would appear that it is now time to buy stocks again. I hope Oscar Carboni is right and that we get a good run on the stock markets, as it is generally easier to make money buying stocks than it is selling or shorting stocks. Personally I expected to see a dip right back down to the old lows that we saw in the stock market back in March 2008 but it would appear that this is not going to happen. There were numerous predictions back in October - November of 2009 that we were headed for a second crash but these predictions have so far proved inaccurate. If the markets do turn around again it will be time enough to check out the charts and the moving averages to get out again if necessary.

Bear in mind too that although Oscar Carboni has made his prediction that we will see 1290 - 1300 on the S&P index this year, he is in fact a day trader and closes all his positions each day so as not to be caught out by any unexpected movements overnight. He also emphasizes the importance of setting stop losses (a stop loss is a point at which you automatically close your trade if you discover it is going against you - thereby limiting your losses to a pre-set and acceptable amount, generally around 4 or 5% of the trade). Stop losses allow you to lose a battle but not the war. In the stock market it is important to preserve capital and make sure you don't get wiped out from one or two bad trades.

Another point to remember is that stock charts give buy or sell signals irrespective of any stock market news that may be announced on a day-to-day basis. The belief is that the news comes out in the charts first. So, for example, there is a lot of news just coming out about Greece needing to be rescued by the IMF and that the Germans say the EU cannot help them, as a result of this 'news' the European stock markets have just turned negative with the FTSE down 12 at 5632 and the DAX down 21 at 6002. The DOW is also losing ground as a result. The charts however are supposed to know all this already and even if the markets do fall back temporarily, people will buy stocks on the dips and send the charts back up again, once the news has become old (around 10 minutes).

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