Postcards: A Quick "Buy" Recommendation on the Shortest Day in the Calendar

The stock is overbought with a Relative Strength Index of 70 or better, but you still want to buy the stock. What do you do?                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: A Quick "Buy" Recommendation on the Shortest Day in the Calendar]( The stock is overbought with a Relative Strength Index of 70 or better, but you still want to buy the stock. What do you do? [Garrett {NAME}]( Dec 22   [READ IN APP](   Market Update: The market rebounded after the biggest selloff in two months. But Nike (NKE) slashed its sales outlook and unveiled $2 billion in corporate costs. Typically, that would make people panic… and there will likely be more selling tomorrow. But from a long-term perspective, are you getting a great company on sale? The P/E ratio remains very high, the central banks keep pumping.]( Dear Fellow Investor, It was a very late night on Wednesday. The holy rollers on Southwest Airlines (LUV) forced me into Boarding Group C. About 15 people preboarded the plane, and family boarding was stacked. This queue forced me into a middle seat at the front of the aircraft. But the only place to put my bag overhead? Back at Row 33. So, I was the last person off the plane as I waited for everyone to deplane first. Sure enough, [the wheelchair pre-boarders all rose as one]( and walked off the plane. When I finally did deplane, [I was able to publish Part 1 of 1993]( the story about the Federal Reserve’s change in monetary policy that makes us all poorer. [Be sure to read it]( since I’ll be releasing Part 2 tomorrow on a change in fiscal policy that accelerated the wealth gap between the Top 1% and the rest of us. There’s much more to do on that piece… so let me brief this message by answering a great question from a Florida Republic member. This is a very important topic. [Upgrade to paid]( “When” Do I Buy? It’s the “shortest day” in the Northern Hemisphere. Today deserves a quick answer. Many of you are readers of other financial publications. You receive stock recommendations on buying names, typically with a “Buy Up to price.” Some of you are traders. But others of you are long-term investors looking for great companies with great business models. A reader asked today about the time to buy the stock… but cited the technical indicators I watch from a day-to-day market perspective. The question reads: “Could you provide some guidance on when to buy a recommended stock when the stocks are already [overbought] (over 70) yet under the investment group buy up to price?”  This reader asks about the Relative Strength Index, a momentum oscillator that tells investors and traders when a stock is technically overbought or oversold. If the RSI is at 70, it’s considered overbought. If it’s under 30, it’s considered oversold. The problem is that many investors might see that the stock is sitting at over 70, and they don’t buy it… and the stock keeps going up and up. So, let’s unpack this answer in a few parts. First, the RSI is a technical trading tool, not an absolute science. That said, it's essential to take the situation into context when you watch a stock go up at a breakneck pace. For example, we have recently witnessed a dramatic short squeeze across the markets, and this recent melt-up is an exception to normal conditions. Last week, about 50% of all stocks in the S&P 500 were in overbought territory. This was the first time the number of stocks hit that territory since 1991. This recent rally is unusual and historical. If you look at this recent rally, and the stocks are still under their “buy-up to” levels, there’s one thing to consider. If you’re focused on the short term, consider using our Equity Strength Signals. If the sector and the Index in which the stock is green, investors might consider buying the stock and setting a tight trailing stop to protect your profit and principal. So, if the stock is at $60 (and the Buy Up to level is $70), consider buying it and setting a 10% stop in case you’re concerned about a pullback. But let’s discuss a more important factor. What is it that you’ve been recommended? [Upgrade to paid]( Quality, Not Quantity If it’s a biotech service… it’s best not to chase stocks above an RSI of 70. If you’re focused on small-cap stocks, it might not be the best to chase the stock higher. But what about long-term investments in companies with excellent capital efficiency? If you’re a long-term investor who wants to buy great companies for the long haul, the RSI doesn’t matter. For example, I’m looking at Porter Stansberry’s [Big Secret on Wall Street]( reports. There’s a list of great long-term energy stocks, insurance names, high-yield funds, and “sin” stocks with Forever appeal—companies with excellent management, high investment capital returns, and attractive valuations. Each stock has a “Buy Under” price level. If a stock in that portfolio is designed for long-term price appreciation and income generation, here’s a “little secret on Wall Street.” With stocks in these reports, the RSI doesn’t matter. The RSI is only a 14-day measurement for an investment that will last a lifetime. You can have confidence buying the stocks and building positions for the long haul. In two weeks, I’ll release a reversion portfolio of stocks for Republic Research and members of Republic Risk. These stocks have excellent management and low valuations. The story goes the same for long-term investors with an eye on gains over the next 18 to 24 months. Always choose long-term quality over short-term technical moves. Stay positive, Garrett {NAME} You're currently a free subscriber to [Postcards from the Florida Republic](. For the full experience, [upgrade your subscription.]( [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2023 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()