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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 27450  
Subject: Re: how to "buy on the dips" Date: 12/19/2012 3:52 PM
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Many use the moving averages as a trend line to indicate a dip. 50 day and 200 day are most common, but shorter term ones can be used.

Of course when stock price falls below the moving average that is a sell sign for many, and you don't know how low it will go. But when a stock repeatedly tests certain lows you can define a support level. Then it becomes safer to buy when the share price falls to near the support level.

Take a look at a Caterpillar chart for the last year. Its a cyclical stock, industry leader, currently hurt by decreased demand in Europe and Asia. It awaits recovery of the construction business (and now mining) and is a likely winner in any water projects or storm surge projects.

http://finance.yahoo.com/q/ta?s=CAT&t=1y&l=on&z=...

The dips are obvious and the support level is about 82. So when price surges below 83 or so, its time to accumulate.

If a stock is up two days and down one, to me that is a good performing stock. Few go up every day. But shorter term traders know to wait for the down day to get a head start on the stock.
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