Another strategy note from IBD:
Pullbacks To 10-Week Line Offer 2nd Chance
Some stocks give you a second chance.
Maybe you were slow in pulling the trigger and missed buying into a stock as it broke out of its base. Or perhaps you were quick enough to snatch up some shares, but want to add to your holdings.
Winning stocks will periodically take a break during their run and drift back to their 10-week or 50-day moving averages. A stock that bounces off these key benchmarks is said to be finding institutional support. That means big investors are stepping in to buy shares and, by boosting demand, lifting the price.
The easiest way to determine when to buy shares is to look at a weekly stock chart. Mini charts in Investor's Business Daily and weekly charts at investors.com show the 10-week and 40-week average lines.
When a growth stock that's been heading higher falls back to touch its 10-week or 50-day line, then begins to climb higher, it's time to start scouting out a buy point.
The buy point is 0.10 above the highest price the stock hit before it began to pull back.
Ideally, you like to see volume pick up as a stock ricochets off its moving average line - the bigger the volume, the more institutional support it's attracting.
On the flip side, a stock that falls through its 10-week moving average on heavy volume and continues south may be in trouble. If you own it, you might consider selling, especially if the stock cannot rally back.
