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To: Investor2 who wrote (868)	6/11/1998 8:16:00 PM
From: Les H	Read Replies (1) \| Respond to of 1471

Re: "The safest strategy would be to watch the breakout, and the usual reaction back to the previous line of resistance. If the price holds, the time to buy would be on the low, in this case $30." No one can actually buy on the low. What one can hope to do is to set a threshold of how far an extension above the breakout point in which a buy will be entered - a limit order. Given the expectation at that time was for approximately a 5 point move (from 26 to 31 to 36, each the depth of the base), no more than 1 point or 32 (about 20% of the expected move). As for Kroger's, the best confidence one could develop in the breakout is that its peer stocks: Safeway, Win Dixie, Whole Foods Market, Wild Oats, etc., were either breaking out or had already done so.

To: Investor2 who wrote (868)	6/12/1998 12:02:00 AM
From: Trader X	Read Replies (1) \| Respond to of 1471

Re: Breakout example, <<How much of a penetration of the support is acceptable?>> Good question. Usually the answer would be, no penetration of support is acceptable. By one has to define what is meant by "penetration". I change the example chart a little to make it easier to read just what happened 10 months ago: chart4.bigcharts.com:80/chart?time=8&freq=1&uf=0&lf=4&type=1&style=3&size=3&compidx=aaaaa&symb=kr&comp=&maval=10&state=0&ma=3&r=chart&onbad=badsymbol&country=us&sid=2783&sec=c&xyz=102774109&s=23449 As you said, there was a sharp drop before the stock rebounded. On closer look, you can see that although the price dipped below support at $30 intraday, it managed to close at support. In my experience, closing prices are more significant than intraday prices. For me, a close at support equals a hold of support. <<How long does the price have to hold? >> That's always difficult to know when it's taking place. In the late Oct example above, confirmation of the hold would have been on the day following the sharp drop below $29, when the price opened and closed higher than the previous day's close. That would have gotten one into the stock at about $31 1/2. <<How long of a flat line of resistance is required to effectively trade a price breakout?>> This varies from about 7 to 13 weeks, in the most successful breakouts. In the late summer breakout, it took about 13 weeks for the pattern to complete. In Dec 97 - Jan 98, a breakout occured in the course of only 7 weeks of resistance at $37. chart4.bigcharts.com:80/chart?time=8&freq=1&uf=128&lf=4&type=1&style=3&size=3&compidx=aaaaa&symb=kr&comp=&maval=10&state=0&ma=3&r=chart&onbad=badsymbol&country=us&sid=2783&sec=c&xyz=104104000&s=29879 One thing to remember about resistance levels is, it only takes two stops at any price point to define a resistance level. A break of resistance can occur on any attempt thereafter. The Jan 98 breakout in KR is an example of that. That pattern is actually a classic ascending triangle pattern -- flat on the top, and rising line left to right on the bottom. -Trader X