In the past several days, AMD stock, Tesla (TSLA) JD.com (JD) and Inphi (IPHI) have already triggered early entry points. But they have all hit resistance and pulled back just as the buy signal flashed.
As CAN SLIM investors get started, they should stick to traditional buy points. But as traders get more experienced, they may look for early entries to start or add to positions. A classic “early entry” is a downward-sloping trend line in handles. The official buy point is 10 cents above the top of the handle. But stocks often begin taking off before that, as they break the downward trend in the handle. This can be a place to start a position, perhaps filling out the stake at the traditional buy point.
However, in the past couple of weeks, that hasn’t work. Tesla stock, Advanced Micro Devices (AMD), JD.com and Inphi have all come up to these trend lines and quickly pulled back. That’s not a necessarily bad mark on these stocks, but reflects the continued pullback in the market rally. With the Dow Jones, S&P 500 and Nasdaq composite still in a downtrend for the past two weeks, it’s hard for any stocks to make real progress.
Plenty of recent breakouts have quickly failed or roundtripped big gains.
Tesla stock initially tried to break above short-term resistance on Oct. 14, but has since retreated, forming a handle with a 466 buy point. Shares briefly peeked above a downward-sloping trend line on Oct. 22, right after Tesla earnings, but quickly pulled back. In the past few days, TSLA stock has been holding support at the 50-day line, but hitting resistance at their 21-day exponential moving average.
As the MarketSmith chart shows, the relative strength line has been holding near record highs, showing Tesla stock‘s strong outperformance vs. the S&P 500 index for much of 2020.
But with the major indexes retreating, Tesla stock hasn’t been able to push higher. At this point, investors looking for an early entry should likely wait for TSLA stock to at least clear its Oct. 22 intraday high.
AMD stock had a handle buy point of 88.82, though by the end of last week the handle was a little too low in the base to be propr.. On Monday, shares popped above a downward-sloping trend line, but gave up most of its intraday gains. On Tuesday, AMD earnings crushed views, but shares tumbled as the chipmaker announced a $35 billion deal to buy Xilinx (XLNX). AMD stock fell though its 50-day line.
Moving above Monday’s intraday high might offer an early entry. But right now, AMD is in danger of undercutting recent lows.
JD.com stock has a cup-with-handle buy point of 85.49. Twice in the past two weeks shares of the Chinese e-commerce giant have come up to a downward-sloping trend line, but haven’t quite broken through. JD.com stock has held support at its 21-day line and its RS line is already at a record high.
Getting above the trend line — or perhaps at 84.56, just over the Oct. 21 high — might be a decent early entry just before the official buy point.
Inphi stock has a 125.93 cup-with-handle buy point. Twice in the past two weeks, the data-center chip maker popped above its downward-sloping trend line, but reversed lower. On Tuesday, IPHI stock reversed lower again, sinking to just above its 50-day line.
Inphi stock was a leader after the coronavirus crash, but the RS line has trended lower since early August.
Investors might want to wait for shares to break above the official buy point.
Inphi earnings are due Thursday. That could be a catalyst for Inphi stock up or down.
With AMD, Tesla and other leaders, investors might want to wait for the stock market rally to show real strength before trying any early entries.
YOU MAY ALSO LIKE:
Why This IBD Tool Simplifies The Search For Top Stocks
Catch The Next Big Winning Stock With MarketSmith
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
Best Growth Stocks To Buy And Watch
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today