GT is another stock that has shown a 100% price move in a very short period of time. I have provided ongoing analysis and presented several buy set ups on this one.
In keeping with the theme of showing a blue print for explosive stocks, it all begins with the break out price. Once you have the break out, you look for price to kick into the Stage 2 uptrend that Weinstein talks about in his book.
Between the months of May 06 and October 06, price formed a base and shows a chart pattern known as a cup with handle. You can have tow types of handles, one handle pulls back, the other trends laterally, know as a high handle.
Technically speaking, a cup with handle is a rally to a new high, a decline of 20 - 50 percent over 8 - 12 weeks, a rally falling just short of the new high level, a second decline of 8 - 20 percent over 1 - 4 weeks followed by a breakout to fresh new highs on strong volume.
Why does it happen and how do you play it?
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The break out, as shown on the chart, came with a wide range, high volume bar. Price closed near the high of the bar which confirmed its bullishness.
All of the things I look for in a stock that is getting ready to explode into a Stage 2 uptrend were evident with GT.
Price broke out above a base on huge volume and had nothing but BLUE SKY ahead. There wasn't any overhead supply to put downside pressure on price. Without any supply to come to market, price is then demand driven. When price is demand driven, you get these very quick 50% to 100% price moves that professional traders look for.
Not every breakout turns into a Stage 2 uptrend, but every Stage 2 uptrend has a break out point.
Some key points to focus on:
1. This 100% price move did not require bottom fishing.
2. Check the volume bars. You want to see considerably more above average up days than above average down days. This confirms professional money is accumulating.
3. The break out point on the chart would scare the novice away. Price looked extended or overbought at the time. The novice doesn't understand the supply vs demand equation when it comes to the market. If they did, they would be buying these break outs. These break outs are driven by professional money and they buy large quantities over time, continuing to drive demand which drives up price.
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