How to Know When to Buy a Stock: Moving Averages, RSI, and Smart Entry Points

9 min. read

When you're trying to figure out if a stock is a good buy, forget the noise and flashy headlines. Let’s get into the fundamentals that actually matter. This guide breaks down how to use moving averages and the RSI (Relative Strength Index) to spot entry points like a pro. No spreadsheets, no guesswork—just a clear, proven method.

What Is a Moving Average and Why It Matters

A moving average tells us what investors have been willing to pay for a stock over a set period of time. It smooths out daily price noise and shows you the bigger picture.

There are three key moving averages we care about:

  • MA50 (50-day moving average): Short-term sentiment.
  • MA100 (100-day moving average): Mid-term trend.
  • MA200 (200-day moving average): Long-term body of work.

A few rules of thumb:

  • If the stock is trading below the MA100, it’s bearish.
  • If it's below the MA100, but the fundamentals are solid? That might be a buying opportunity.
  • Use MA120 to confirm trends between the MA100 and MA200.

Understanding Corrections

A correction is when the stock drops 10% or more from its previous high. While that sounds scary, smart investors see this as an opportunity. It’s the market going on sale.

The 200-Day Moving Average: Your Long-Term Compass

The MA200 tells you what the stock has done over a long period. If a stock is trading below the MA200, but the fundamentals haven’t changed, that’s your signal to really dig in.

This is where long-term investors can find serious value. Stocks don't stay discounted forever.

RSI: Relative Strength Index

The RSI tells you if a stock is overbought or oversold:

  • Above 70 = Overbought (Price may pull back)
  • Below 30 = Undervalued (Potential buying zone)

We also consider 55-70 to be lukewarm. If you’re seeing an RSI below 55, it could be time to take a closer look.

The 3 Price Points for Buying a Stock

This is how we break it down:

  1. Gaining a Position: When the stock is below MA50 but above MA100
  2. Taking Advantage: When it's below MA100 or MA120
  3. Loading the Boat: When it drops below the MA200

Each of these levels is more aggressive than the last, but all of them offer chances to buy in below fair value.

Final Thoughts

Timing the market perfectly? That’s a myth. But recognizing when a stock is on sale based on moving averages and RSI? That’s just smart investing. Combine this with strong fundamental analysis—like free cash flow, debt ratios, and earnings growth—and you’re no longer guessing. You’re strategizing.

Want to stop relying on emotion and start using real tools to grow your portfolio? That’s where StockQuery comes in. Our AI-powered analysis helps you find opportunities without spreadsheets or stress.