If you caught my earlier posts about buying stocks using the IBD 200, then you should know that today I closed out my position in Open Table, Inc. (NASDAQ:OPEN) at the beginning of the trading day today. The results? I originally purchased 22 shares of OPEN at $44.95. Today, I sold it for $54.39. This was a 21% gain.
I wanted to share with you a couple of things that I learned about buying stocks during the process and why I think that this is a great way to find stocks to buy.
First off, I wanted to say that this stock market investing method is really simple. Stockbee does a great job on his site explaining things to all of his readers. What I really like about it is how you can have a watch list created for you each week. It’s automatically pruned each week to 200 stocks. I like this because you don’t have to figure out when to take stocks off your watch list.
Second, I think it’s important to point out that you only want to buy stocks when the market is in a confirmed uptrend. I didn’t select this stock until the IBD Big Picture column gave the green light. The other day, the market started a correction and I started thinking about sellling it. I really probably should have sold it a few days ago. I feel like I lucked out that it didn’t go south like my Cummins Engine stock did. I sold that position as well for a 7% loss. It’s since went down further.
If you are just beginning to learn how to buy stocks, I’d suggest that you also focus on one stock at a time. It’s easier to keep an eye on one stock.
I also set a price target of $53.49 up front (I sold it at $54.39) as well as determined when I would sell if it dropped. Knowing this information up front makes deciding what to do a lot easier when you are in the moment.
I sold it mainly because the market is in a correction right now. If it wasn’t I probably would have tried to keep for it at least 8 weeks. This is what O’Neil recommends when it goes up this much so quickly.
The final thing I noticed is that right before it’s 20% plus gain completed it’s final run, the stock was downgraded by analyst. Today it was upgraded by Bank of America. This might be a clue that the big money is on the way out. I am not sure. It’s just a hypothesis at this point, but I think it’s possible that the stock will fall now that it was upgraded. We will see.
You can read more about how I used the information in How To Beat The Market For $1.25 Per Week in my post called Stock Market Investing For Beginners Using The IBD 200.
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