Frequently Asked Questions

Market Lab Report
It appears to me that stock XYZ could be setting up for a 4th stage base or consolidation, am I wrong?

We dont weigh base count that heavily since buying and selling pressure show up in price/volume action of a stock. Some leaders can form 5,6,7 or more bases on the way up. That said, fourth stage and higher bases are more failure prone since statistics show stocks are potentially nearing the end of their long runs. However, the strongest stocks could have climax runs after their last stage base which you dont want to miss since the time value is enormous. Because it is impossible to know which stocks will have such dramatic runs into their ultimate tops, we stay focused on price/volume to keep me in or out of the stock. We dont want a late stage base in an exceptional stock to scare us into buying a smaller position. We'd rather place more importance on variables such as fundamental and technical strength of the stock.

Published: Oct 27 2010