Is Buying Pullbacks a Profitable Strategy?

TL;DR

Buying pullbacks during a confirmed uptrend can be a highly profitable strategy. Using moving averages such as the 21-day and 50-day, investors can identify key support levels and look for price reversals to make informed trades on stocks like Zscaler, Veeva Systems, and Sage Therapeutics.

Transcript

hello everyone and welcome to investing with IBD for June 12th 2019 I'm your host Arusha Pierce and with me in the studio today is Charles Harris senior VP and portfolio manager of O'Neil Capital Management thanks for being here Charles hey thanks for having me on today's podcast we're gonna talk about the markets buying pull backs and of course we... Read More

Key Insights

• 🙃 Buying pullbacks in a confirmed uptrend market can be a profitable strategy, especially when supported by moving averages and upside reversals.
• 💪 Stocks like Zscaler, Veeva Systems, and Sage Therapeutics have demonstrated strong price action and support off moving averages, making them potential candidates for buying pullbacks.

Questions & Answers

Q: How did Charles Harris come up with the idea of buying pullbacks in the market?

Harris developed his strategy of buying pullbacks through years of trading experience and realizing that he preferred to buy stocks at lower prices when others were selling in a confirmed uptrend market.

Q: What moving averages does Harris use to identify support levels for buying pullbacks?

Harris primarily uses the 21-day and 50-day moving averages to identify support levels, with a focus on looking for upside reversals and supporting price action off these moving averages.

Q: What are some key factors Harris considers when deciding to buy a pullback in a stock?

Harris looks for stocks with strong fundamentals, a clear uptrend, support from moving averages, and supporting price action like upside reversals or strong closes near the high of the trading range.

Q: How does Harris manage risk when buying pullbacks?

Harris emphasizes the importance of defining risk and using a scaling approach to gradually buy a stock during a pullback. He waits for supporting price action before adding to his position and uses the low of the upside reversal as a line in the sand to define his risk.

Summary & Key Takeaways

• Charles Harris shares the story behind his infamous "Market Wizard" license plate and the lessons he learned from experiencing a massive loss during the tech bubble.

• Harris emphasizes the importance of buying pullbacks in a strong market, using moving averages like the 21-day and 50-day to identify support levels and look for upside reversals.

• He analyzes stocks like Zscaler, Veeva Systems, and Sage Therapeutics to demonstrate how buying pullbacks can lead to profitable trades.