Tuesday, April 5, 2011

understanding the pattern of the trend

The pattern that forms is characteristic of the stock. There are many chances that the pattern repeats itself in the continuation rally.

For example, VRX and SHS have a similar pattern. These stocks go up steadily and never come down. VRX when up from 30 to 35 stabilized there for a couple weeks at 35 then moved to 40 then stabilized there for a couple of weeks then moved to 54 now. These are the kind of stocks that people loose patience during consolidation and sell it off to see the stock move up 30 percent in the next couple of weeks. These stocks when they consolidate they touch the 30 day moving average and some time stay there, borderlining the 30 day moving average for a couple of week. I have seen this happen a number of times and I was deceived many times and sold of the stock. But I realized now that that was great mistake. Look at SHS, this is a wonderful stock. When it moved to 40, I did not purchase it but it is now at 54. The good thing about this kind of pattern is that these stocks never come down 5 percent and are always above the 30 day moving average. When it broke the resistance at 30, this stock just jumped.
These are the kind of stock where you want to put the limit order just above the resistance and leave it for a couple of weeks. When it clicks, that will be one of your best buys.

There is another pattern like the one in BRKR, this is like the stock goes up 15-20 percent then comes down 5-6 percent to touch the 30 day moving average.

Again and again, stock that have less number of stocks like OPEN and TZOO, less than 30 million shares, jump like crazy after a couple of weeks of consolidation. Need to watch out for these stocks all the time. When the break the resistance, they will jump 30 to 50 percent.

So the point is when you see the pattern, with long resistance, when ti breaks the resistance, it breaks it with full force and moves 30 percent. One needs to keep watching these stocks when they will break the resistance. When they do, do not sell but hold unlike the other pattern that goes up 20 percent and comes down 5 percent. Even those stocks the make half loops above 30 day moving average, there is no need to sell but follow the stock with sell stop trailing.

Still learning. Until the stock down not cross the 30 day moving average, and goes to stage 3 hold the stock.

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