Lately, I have been receiving a lot of queries on when to buy shares in the local stock market.  In response, I am dedicating this column to answer the numerous questions I have received from my readers and personal friends.

As a trader for many years, I always buy stocks when their prices go down below their 15- to 30-day low.  This is what we call “buy low, sell high” strategy.  It works for me and for my trade partners for many years, and I think it would work for anyone else.

Our strategy is to buy high-volume turnover stocks (value or blue chip stocks) when they are at their lowest or when the price dips during a trading day based on how close it is to their 15- to 30-day low.  Normally, value stocks, as well as blue-chip issues, with well-structured corporate fundamentals, seldom go beyond their 30-day low; not unless there is a global financial instability, major political turmoil or devastating calamity that could directly impact on the world’s economy. 

Under normal economic and political conditions, a price dip closer or equal to the 15-day low of a good stock is a “buy” opportunity while a dip closer or equal to the 30-day low is a “must-buy” opportunity.  Ultimately, any dip lower than the 30-day low is a “steal”.

You can easily get the information on the 15-30 day low of any stock traded at the Philippine Stock Exchange website:  www.pse.com.ph. 

A recent example is the price of Philex Mining (stock code:  PX).  PX is a high-volume turnover stock with excellent corporate fundamentals and a skillful management. Last month, PX traded at a low of P20.30, which is lower than its 30- day low of P20.40.

At that price, a trader following the price-dip strategy should have already bought the shares. Even if the price could still go lower, the future probability of a modest gain in the long run would outweigh the probability of a loss when a stock is bought lower or equal to its 30-day low. Currently, PX is being traded between P21.30 and P21.50 or a monthly gain between five percent and six percent from its 30-day low.  I expect this price to go even higher in March-April when their 2011 net profit is presented to the public.

For a sophisticated trader, charts are used to determine the time to buy and sell.  But the comfort zone in buying to an unsophisticated trader is when you buy a stock at its lowest during the 15- to 30-day low. Bear in mind that good stocks bought at higher price take a long time to gain. Under this condition, be prepared to wait for at least six months or a year to profit because good stocks generally gain in the long run as a result of changes in its corporate and financial structure within an operating year.

As to the time to sell, you can ask your private broker for their unsolicited advice since they use charts to trade.  My advice:  Follow your instinct or intuition but ask for advice from your broker and friendly professional traders to broaden your buying and selling perspective. That way, you would be able to learn and experience first hand the technique of trading, and over time you will become an experienced stock trader.

Lately, all traders gladly welcomed the surge in the Philippine Stock Exchange Index. For those who have bought at lower prices, this is the opportune time to sell and gain. 

For those entering the market, this is the period to wait before buying your favorite stock. Always remember that any stock, no matter how good, will either go up or down. Patience to wait when the time is ripe to buy is a must virtue for any inspiring trader.

In my next column, I will guide you on what stocks to buy in this year.

Till next week.

In the meantime, keep your mind on the money and your eyes on the market.