Contact Energy - CEN Chart

[Phaedrus]

The best stocks are usually quite boring and CEN is no exception. Contact Energy went nowhere for well over a year back around 2002, but those that bought on the breakout above this trading range have been well rewarded - Contact Energy has now been in a steady uptrend for nearly 3 years, so far. Such buyers would be looking to sell on a break of the confirmed trendline or perhaps a Close below the 200 day ema or a 13% trailing stop. Current price action is well above these 3 indicators.

This post is not to highlight an historical opportunity that some of you probably missed, but rather to illustrate the use of oscillators to time entry into a stock that is already in an uptrend. Many hard-line fundamentalists claim that no attempt should be made to time entry into the market, because, they say, it is impossible to do so effectively. These are the advocates of "dollar cost averaging" whereby you simply buy anytime without regard to current price action. The basic idea is that sometimes you will buy high, sometimes low, so that overall you average out your entry price. The premise here is that it is impossible to beat the average. This is nonsense.

Take a look at the attached chart. On it are plotted "Buy" signals from a range of oscillators. You can see that pretty much without exception these have all flagged excellent entry points into this stock. Often these occur in clusters as multiple signals are triggered at around the same time. It is patently obvious that use of these "Buy" signals would beat any system based on purely random entry points. Anyone wanting more signals than are plotted here would use shorter oscillator time periods. Use of longer time periods would give fewer signals, if that was what you wanted. Varying the period allows you to control the sensitivity of the indicator and thus the number of signals it generates.