[JLJ]

I've had my eye on a particular stock that's tripled in price in the past year or so. It had no P/E for quite a while and now I look back and the P/E is 184 - the average for its industry is 17. Not a good P/E but at least they're finally making money. I'm considering buying some because their price has gone up consistently for the past year or two - it's actually tripled. Should I just forget about buying this (for swing trading) because of this P/E?

[MadMarketScientist]

My thought would be this.

You didn't share the stock symbol that I saw - that would help to get more opinions.

But, if the only reason you're buying is because it has gone up a lot for the past year, than I would say you don't have nearly enough reason to be buying. You sound like you are looking at this like a fundamental play, not one based on technical analysis.

If that's the case, I would think you'd want to have a lot more analysis on WHY you think it will continue to go up for a swing trade, besides the fact that it has been rising. Granted, momentum does count for a lot, and there could be many very valid reasons it has climbed, and could continue to do so, but I think your analysis should be much deeper than it is so far.

[sevensa]

Originally Posted by JLJ »

I've had my eye on a particular stock that's tripled in price in the past year or so. It had no P/E for quite a while and now I look back and the P/E is 184 - the average for its industry is 17. Not a good P/E but at least they're finally making money. I'm considering buying some because their price has gone up consistently for the past year or two - it's actually tripled. Should I just forget about buying this (for swing trading) because of this P/E?

What do the rules in your trading plan say? Do they allow you to buy it?

[JLJ]

the stock is ANN.
I wasn't even attempting to look at technical analysis for this, more fundamental. And you're right that I've only taken a superficial look. My next step, I suppose, is to learn more about the company and the industry to discern why the stock has gone up and whether that's likely to continue.
No one has said, yet, that I should rule it out simply because the P/E is 184 and the average for its industry is 17. To my newbie mind, that does not sound good.

[JEHs]

Originally Posted by JLJ »

the stock is ANN.
I wasn't even attempting to look at technical analysis for this, more fundamental. And you're right that I've only taken a superficial look. My next step, I suppose, is to learn more about the company and the industry to discern why the stock has gone up and whether that's likely to continue.
No one has said, yet, that I should rule it out simply because the P/E is 184 and the average for its industry is 17. To my newbie mind, that does not sound good.

I Think most here are technical traders, that is, they trade from chart patterns, support/resistance that sort of thing. I would guess not to many here would even give PE a thought.

If the stock is in an uptrend, then you would think long; downtrend think short. PE doesn't matter.

Now if your looking for a stock with good fundamentals that you might want to buy and hold for the long run... that's another story. That, in my opinion, is not trading. That is investing, and I guess I quit thinking of the stock market as a place to invest money a long time ago, but that's just me...

[JLJ]

Thanks everyone for your feedback. Part of my confusion is that I was thinking simplistically that day traders look at technical analysis and investors look at fundamentals. I don't yet know how to assess a stock for swing trading.
It had not occurred to me that technical analysis was the way to go when contemplating buying a stock I might hold for a matter of months. I thought TA was more for day traders.
I see there's a section on TL for Swing Trading, so I'll start reading that to bone up. Thanks, folks, for your patience with my painfully basic newbie questions.

[MadMarketScientist]

Arguably, using technical analysis on longer term charts is even more powerful because you don't get some of the day to day or hour by hour noise you get with day trading. So you can definitely take a swing or position trade off of technicals.

It's simply a matter of bumping up the timeframes you're looking at -- it's like someone looking at a chart on a 1 minute, 5 minute, 89 tick chart, etc... vs. looking at it on a 4 Hour, daily or weekly chart. By doing that, many times the same technical approach works, it's just the time horizon has changed considerably.

As for the way I look at things, my specific approach which may not fit your criteria, the last time I had a buy signal on ANN was the break of $16+ and it had a nice run, right now I would only be looking for a new buy once it pulled back to the 18.50 - 19.00 range and bounced off that level before entering -- otherwise for me on a swing basis it hasn't met my criteria yet for a new buy.

[JLJ]

This is very helpful. Thank yoouuuu!