Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. So what are the best stocks to buy now or put on a watchlist? General Motors (GM), Deere (DE), Hilton Worldwide (HLT), STMicroelectronics (STM) and Cheniere Energy (LNG) are prime candidates.
ince the coronavirus bear market, stocks rebounded powerfully. The strong action reflected rising confidence that the economy will eventually recover from the coronavirus. But as inflation worries grow there are also signs the stock market is hitting uncertain waters.
Last month the Federal Reserve held its final meeting of the year. Stocks have coming under pressure after the recently released Fed minutes showed a more hawkish approach to interest rates and bond purchase tapering than initially thought.
Best Stocks To Buy: The Crucial Ingredients
Remember, there are thousands of stocks trading on the NYSE and Nasdaq. But you want to find the very best stocks right now to generate massive gains.
The CAN SLIM system offers clear guidelines on what you should be looking for. Invest in stocks with recent quarterly and annual earnings growth of at least 25%. Look for companies that have new, game-changing products and services. Also consider not-yet-profitable companies, often recent IPOs, that are generating tremendous revenue growth.
IBD's CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
In addition, keep an eye on supply and demand for the stock itself, focus on leading stocks in top industry groups, and aim for stocks with strong institutional support.
Once you have found a stock that fits the criteria, it is then time to turn to stock charts to plot a good entry point. You should wait for a stock to form a base, and then buy once it reaches a buy point, ideally in heavy volume. In many cases, a stock reaches a proper buy point when it breaks above the original high on the left side of the base. More information on what a base is, and how charts can be used to win big on the stock market, can be found here.
Don't Forget The M When Buying Stocks
A key part of the CAN SLIM formula is the M, which stands for market. Most stocks, even the very best, follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when the stock market goes into a correction.
Negative action following the latest Fed minutes saw the IBD market outlook switch to "uptrend under pressure." While a stock market rally started 2022 it soon fell on its face. Last week indexes closed modestly to solidly lower. The Nasdaq remains stuck below its 50-day moving average while the S&P 500 is trading around this key level for now. The Dow Jones Industrial Average tested support at the 50-day line.
With the uptrend coming under pressure investors should stop buying stocks. A possible exception is exceptional breakouts in exceptional stocks. It is also a bad time to be adding shares to existing holdings. Investors should also get off margin.
Taking some profits is a good idea. Target stocks that recede after they've rallied 20% or more from buy points. This is the time when it's crucial to stay on top of sell signals. Any stock that falls 7% or 8% from your purchase price should be sold in whole. With stocks that have been rising above their 50-day or 10-week moving averages, beware of sharp breaks below those lines.
It is also a time to be building a watchlist of fundamentally strong stocks with good technical setups. The stocks below are ideal candidates. Nevertheless, it remains crucial that investors stay disciplined and stick to sound buy and sell rules.
