A Few Leading Stocks Can Break Out From Short Bases
BY NANCY GONDO
INVESTOR'S BUSINESS DAILY
Wednesday, March 9, 2005
Most sound bases take at least seven weeks to form, with the exception of a flat base, which can be as short as five weeks.
In rare cases — repeat, rare — leaders break out of shorter, cup-shaped bases and rise to new highs and big gains.
Keep in mind that short bases tend to carry more risk, since they don't take enough time to flush out most of the weaker shareholders. It took an average of 33 weeks for the biggest-winning stocks over the past 50 or so years to form a base, IBD studies indicate. So be extra cautious when you spot a breakout from a shorter-than-usual pattern.
The same rules for longer bases apply to shorter ones. For starters, make sure the stock boasts strong fundamentals in a leading industry group. Look for volume to dry up along the bottom of the base and spike up at the breakout. The price action should be tight. Also, breakouts tend to be more successful when the market's in an uptrend.
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More with an example and chart. Nothing directly related to SYNA. I thought this appropriate given the current circumstances.
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