Sunday, September 18, 2005 11:31:44 AM
Stockscroes Strategy of the Week - FYI
Stock price is based on information, and how the market judges that information. Resistance is a horizontal price ceiling that represents the upper limit on what the market is willing to pay for a company. New information is often the reason why stocks break through this price ceiling.
However, our success in the market will not be great if we simply buy stocks because they are breaking through resistance. Another critical consideration is the price volatility of a stock before the breakout.
If a stock's price has not been volatile, relative to its own history, before a breakout, then the breakout is more important. Low price volatility indicates that investors have come to some consensus on what the stock is worth, making a breakout even more important.
This strategy looks for stocks that are breaking through resistance that has held up for at least four months. The longer resistance has held up, the more important a breakout is. While it is more difficult to break through long term resistance, successful breakouts tend to develop in to longer term upward trends.
1. T.CLL
T.CLL is breaking from a pennant pattern with abnormal trading volume. After moving up nicely in early August the stock went in to a reconciliation phase that seemed to recharge buyer interest. Unless support at $2 is violated, I think this stock has good potential. Disclosure: I bought this stock on Friday.
Can't post chart for this one
2. ININ
ININ made a breakout a few weeks ago and then went in to a sideways trading pattern. Friday brought a confirmation break with even better volume that I think is a good indication that this stock wants to go higher. Support at $6.
Stock price is based on information, and how the market judges that information. Resistance is a horizontal price ceiling that represents the upper limit on what the market is willing to pay for a company. New information is often the reason why stocks break through this price ceiling.
However, our success in the market will not be great if we simply buy stocks because they are breaking through resistance. Another critical consideration is the price volatility of a stock before the breakout.
If a stock's price has not been volatile, relative to its own history, before a breakout, then the breakout is more important. Low price volatility indicates that investors have come to some consensus on what the stock is worth, making a breakout even more important.
This strategy looks for stocks that are breaking through resistance that has held up for at least four months. The longer resistance has held up, the more important a breakout is. While it is more difficult to break through long term resistance, successful breakouts tend to develop in to longer term upward trends.
1. T.CLL
T.CLL is breaking from a pennant pattern with abnormal trading volume. After moving up nicely in early August the stock went in to a reconciliation phase that seemed to recharge buyer interest. Unless support at $2 is violated, I think this stock has good potential. Disclosure: I bought this stock on Friday.
Can't post chart for this one
2. ININ
ININ made a breakout a few weeks ago and then went in to a sideways trading pattern. Friday brought a confirmation break with even better volume that I think is a good indication that this stock wants to go higher. Support at $6.
Going Long on a penny or a pinkie? Bad Choice - but you WILL learn the hard way! Most of the gurus on these message boards don't really have a pot to piss in! Just a lot of membermarks and perhaps a single wide! GOT FRONTLOADED?
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