Over the past couple of weeks, the Dow has taken a nosedive into sub-11,000 territory and is currently trying to fight its way back. However, this is still way off the highs it set just last October when it hit the 14,000 mark. Of course, the economic problems will likely keep the market from retouching those lofty levels, but it is safe to say there is probably more upside than downside at this stage of the game.
This is how I try to look at individual stocks. Upside vs. downside potential. I have had my fair share of bad buys over the years listening to the so called "experts" on CNBC. So I set out to educate myself on better understanding optimal times to buy stocks. Obviously, no one is able to predict which way a stock is headed, so the name of the game for me is to figure out the best time to enter that will maximize the upside/downside ratio. There are many sites on the Web to learn about the various candlestick patterns representing bullish and bearish signals which can be used to trigger appropriate buy/sell signals. I often evaluate these charts, but for me, I tend to keep things simple with 2 basic metrics: