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Axion International Holdings, Inc. Message Board

  • mikebert mikebert May 8, 1998 4:07 PM Flag

    Basing

    I'm new to this. I've read that one should add to
    your long term position by "buying on the dips". So I
    bought ANLT on the recent (and apparently ongoing dip).
    And as a result I bought a lot of what turned out to
    be expensive stock. But now some posters suggest
    that one can avoid paying too much by waiting until
    the stock has "based" before buying.

    But what
    is based? Is a "base" a horizontal period? Look at
    the chart. This stock has declined in a series of
    steps of up to 6 days in length. Is a horizontal period
    of 7 days, or 10 days or 12 days a base? How long
    for a base?

    Or, do you wait until the stock
    has established a definite uptrend, and so identify a
    bottom retrospectively? (Of course by then you can no
    longer buy at the bottom price) How far above the
    apparent bottom you you allow it to rise before you buy,
    figuring it has finally seen bottom? If you wait long
    enough, you will end up paying about what you would if
    you had averaged down.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Go look at a one-year chart for WDC (Western Digital)

      See the "base" that started around Jan 98....?

      Now that's a base. WDC is getting set for a major advance.

      3.14159

      • 2 Replies to pi3point14159
      • Looking at WDC, here's what I see. If I averaged
        down on WDC, I probably would have bought at 27, 20
        and 15 for an average of 20.7. If I waited until an
        uptrend was in place I would probably buy at 18-19 in
        February, an 11% savings. Hmmm. I learned something here.
        Thanks :)

      • Rather than compare apples to oranges you may
        want to try this URL:
        http://www.stockpoint.com/scripts/quote.asp?Mode=DAILY&Symbol=anlt which will show a significant piece of ANLT
        trading patterns. If you are successful inpulling up the
        graph you will see the base trading range formed
        between 10 & 15 during the period May thru June of 1997.
        Trading then saw an extended base at a higher level
        between 18 & 28 for a longer period of time - July thru
        November '97. At the end of November and early December
        '97 the uptrend that carried the stock to its recent
        high just over 54 began. You can now draw a trend line
        from the point just below 20 in October, 1997 to the
        dip to 37 in March 0f '98. This trend line was
        respected all the way up until it was significantly broken
        last month.

        As you can see, the stock's current
        slide appears to have been halted by the base formed
        between 18 & 28 which by definition in technical analysis
        now beacomes a support level from which any new
        uptrend will occur when a sufficient amount of back and
        fill trading takes places to absorb what ever overhead
        stock supply exists. There is no known way of
        determining how long it can take for this base to
        form.

        From its trading history you can see that a move of
        better than 100% took place out of the May-June base.
        The next 100% plus move took a base formation of some
        five months in the making. What will be the really
        reliable first indication that the present downtrend may
        have ended? It will be the breaking of the downtrend
        line that can be extended from the high at 54.75 to
        the most recent rally to around 35. Then if the stock
        is able to withstand the selling that will come in
        around that point and continue to build a lateral
        formation between 33 and whatever the highest penetration
        the stock made when it crossed 35 you can get a
        clearer picture of where it's new upside potential may
        be. Of course the short term trader types may be
        quite satisfied with a move to 35 take their profit and
        move on to new fish.

        Just a brief comment on
        today's news. If the price paid totaled $440,000 spread
        over 7 years, the likelyhood of the sales contribution
        exceeding $1.3 million per year currently is quite limited.
        I doubt that a management such as Analytical
        appears to have would pay in excess of 3X sales if that
        much. It is quite possible that the location of the
        acquisition more so than its function delayed completing the
        acquisition when the parent company was bought last year.
        India is notorious for screwing up foreign interests.
        Ask Enron.

 
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