Stock XYZ used to trade at 40 and it has dropped to 25. Is it a good buy?
Maybe. Buying stocks just because they look “cheap” isn’t a good idea. All too often they look cheaper later on. (Oak Industries, in Cable TV equipment, used to sell in the 40s. Lately, it’s recovered from 1 to 3. IBM looked “cheap” when it went from 137 or so down to 90. You know the rest.) Wait for XYZ to demonstrate that it has quit going down and is showing some sign of strength, perhaps purchasing in the 28 range. If you are expecting a return to 40, you can give up a few points initially. Note that this situation is the same as trying to sell at the top, except the situation is inverted. See the comments on “base building” in the Technical Analysis section of the FAQ. • I’d like to sell a stock since I have a good profit, but I don’t want to pay the taxes. What should I do? A: Sell the stock and pay the taxes. Seriously, if you have profits, the government wants their (unfair) share. Their hand (via the IRS) is in your pocket. If you don’t make any money, then you won’t owe the g
