When picking a stock to buy, a good tool to use is the 10-week line. If the stock is building a base and has maintained support above this important level, chances are you have uncovered a buying opportunity.
Several IBD 50 stocks are now signaling this bullish action, including biotech firm Sarepta Therapeutics and specialty-chemical maker Albemarle.
The market downturn and elevated volatility have created a series of winners and losers, setting off buy and sell signals among IBD 50 components. Several are in new bases, while others have tumbled below their 50- and 200-day moving averages, forcing shareholders to exit positions.
Find The Best Stocks With Weekly Charts
The weekly chart in MarketSmith's chart analysis helps investors understand longer-term trends. Using daily and weekly charts together can supercharge your analysis, helping to distinguish between normal price changes and a true shift in market trend. This information will prove invaluable when it comes to pinpointing the best times to buy, sell or just sit tight.
It's always a good idea to keep abreast of William O'Neil's CAN SLIM investing strategy. You can start your own research with the IBD Stock Checkup.
IBD's flagship screen of leading growth stocks identifies 50 companies showing strong relative price strength and top-notch fundamentals. And it ranks them for you.
Before you decide what to buy, always check out these new and innovative stocks that have outperformed the S&P 500 by a wide margin.
Use The 10-Week Line To Choose The Best Stocks
Sarepta and Albemarle stand out in this challenging market environment.
Sarepta Therapeutics has held support above its 10-week line since late June. Excitement is growing for the company's gene therapy for Duchenne muscular dystrophy, dubbed SRPT-001.
As you can see from the weekly chart, it has crisscrossed that critical line in both good and bad times for more than a year. The stock is extended past its 93.60 buy point, crossing into its profit zone in early August, and appears to be forming another base.
The 802-component Medical-Biomed/Biotech industry group ranks a lofty 6th out of Investor's Business Daily's 197 industry groups, ranked by price performance in the last six months.
Albemarle Maintains Support, Creates Buying Opportunity
Albemarle has also maintained support above its 10-day line.
Looking at its weekly chart, you can see that level of support has been consistent. The stock has lost ground from an earlier 273.78 buy point but has not fallen into its sell range, despite the market downturn.
Investors may want to see a new base form, or perhaps pause for a little longer, before expecting a major rebound.
On the flip side, investors can use the 10-week line for deciding what not to buy just yet. Again, there are several examples in the IBD 50 that fit that bill.
Software/chip designer Cadence Design Systems and building products maker Advanced Drainage Systems recently broke out from their respective bases, but quickly fell below their 10-week lines.
This warns investors to be cautious about new entries.
Follow Michael Molinski on Twitter @IMmolinski
