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.
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.