“Stock to Watch” (Taser Int’l)

It isn’t often that I post here about specific stocks, but I will try and do more of that since looking at the movements in specific stocks provides good lessons in buying and selling. Taser International (TASR), a former high flyer that has since come back to earth has carved out a very interesting chart in the last few months and provides a good look at the importance of buying VS. selling volume. The one thing that stands out to me about this chart is the dramatic difference in buying vs. selling volume. It is absolutely clear that the majority of those willing to sell have sold as the number of sellers continues to decline. Those holding the stock now are strong holders, most likely holding for the long term. Once the market turns, this is a stock that could take off once again. You can see what happened in June as sellers gave way to buyers. I realize the CANSLIM method doesn’t recommend buying a stock near the bottom, but there are times when it can be extremely profitable. What should you look for in these situations? 1. Most importantly you want to see a clear trend of decreasing selling volume. 2. You also want to see the stock hold up at a major support level (more than one is preferable – trend line + moving average). When you see a stock clearly being supported at a certain level, a drop below would indicate that the risk of further selling increases dramatically. It is your clue to get out with a very small loss. That being said, should you buy as the stock is settling in at support? If you can watch the market during the day, then no. Wait until you begin to see the shift to buying with volume. This can happen very quickly, so its best to create alerts at various price points and then check a 1 or 5 minute chart for a surge in buying. Of course many aren’t able to sit and watch a stock during the day. In that case, it may be best to buy as close to support as possible and add a stop loss a few percent below major support. (** In the case of TASR, you see the support of the 200DMA as well as previous support in the 24-26 range.) 3. Try and anticipate how much time the stock will continue basing. Do this by looking at the shape of the chart and assume it may form a near symmetrical base. ** TASR looks to be forming a double bottom base. If a well formed double bottom base is forming, it will need to spend more time basing and possibly undercut the low of the first bottom at 23.76. 4. All other CANSLIM criteria apply. – Must be a leading stock (strong earnings/sales, profit margins, ROE) – Stock a part of a leading industry – Need healthy market Taser International meets all the criteria, now we just need a health market! As always do your own research before making any buy and sell decisions.

One thought on ““Stock to Watch” (Taser Int’l)”

Leave a Reply

Your email address will not be published. Required fields are marked *