>>> I have seen people bypass this sector when uranium was selling for less than half of the current price, thinking they would wait for a pullback to enter positions. On that basis, one would still be waiting. <<<
Good comments, reminds me of the difference between the professional trader and the novice.
Buying the break out or waiting for the pull back?
Contrary to what we hear on CNBC, it's the professional trader that buys the break out, the novice trader waits for the pull back.
When we see price breaking out to new highs on above average volume, price is being driven higher by the professional trader. The novice trader doesn't buy break outs.
The reason professional traders buy break outs is because they understand the law of supply and demand.
When price breaks out, every one who owns the stock is holding a winning hand. There isn't a single shareowner holding a losing position. Losing positions are called overhead supply. If there isn't any overhead supply, there isn't any selling pressure to slow price down. When you have a price move driven by demand, absent any overhead supply, you get those explosive price moves that show 50% to 100% moves in a short period of time.
Not every break out is successful, but every successful break out is driven by professional money.
When we wait to buy at lower prices, every person who bought above that price is holding a losing position. They are praying for price to come up to their entry level so they can sell and get out even. This overhead supply waiting to come to market puts downward pressure on price. It takes twice as much demand to offset what a break out can do if we are to get the same results.
To gauge demand, all we have to do is look at volume and money flows. If the demand is there, price is going higher. The pro understands that. That's why they aren't left behind when price breaks out. |
