when i started investing many years ago it was always buy low and sell high. In the last 3 minutes cnbc has had a commercial with cramer saying buy high and sell higher. The guy from Fast Money also has the same attitude, sell stocks nearing 52 week lows and buy stocks at 52 week highs.
Don't you know, it's the new math in stocks. Stocks can never go down, so you can only sell higher. Everything has changed. Just like Cramer's infamous speech of 2000 ("the only stocks worth owning" - "winners of the new world"). He was right then. right?
s2007s it's taken me many years to realize that yes often you buy at highs and go even higher. The reason-- there's only so many great stocks and it's impossible to be in waiting in each and every one so when a great stock doubles and looks pricey ( F5 at $45) it then goes on another even more massive move. Trading styles afford one enough time to pick and chose fallen angels, and other stocks way off their highs, but for the most part in a semi fast trading environment you can buy high and sell higher. And that doesn't mean you are saying the market is never going down again. It's not frivolous I bought XOMA today at $3. something do I wish it was $2 something? hell yea but it's taken me a week or two to get familiar with the stock-- If I see $6-$9 easy in the long run life cycle of the stock, who cares . It's all about life cycles with these stocks- each has it's time in the sun and that's the trick of rotation always stay involved in a fresh story. A stock can make multiple new highs over several years ( look at VSDI) today and a stock can break- MRVL- and just never be the same.. Stock Life Cycle broken. The trick is to catch either great stocks on the upswing, early in their life cycle- or good stocks after temporary set backs. Leave the deep discount buy low stocks to the professionals- some mutual fund that dabbles in risk arb, private equity and emerging bankruptcy cases...
I pretty much agree with StonedInvestor. Buying new 52-week highs backtests pretty well, and is rather satisfactory to trade. Dreman's contrarian methodology also backtests pretty well, but you need more patience to trade this way.