Following Through
As intermediate-term momentum traders,
we prefer to see our new buys break out on strong volume. As I’ve pointed out
many times in the commentary, that’s the best possible scenario.Â
However, we don’t always get
perfection. If the base, technicals and fundamentals line, I’ll trade the
breakout, even if the volume is mediocre. Sometimes price leads volume, which
comes in a session or two later. Manor Care
(
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PowerRating), which had been on my
base-building radar, broke out Friday on volume of 900,000 shares, only 26%
above its average daily trading volume over the past 50 sessions. Despite the
unimpressive trade, that was a legitimate breakout. It’s also worth noting that
Friday’s volume did represent a significant expansion above the daily volume
over the prior three weeks.Â
Sure enough, the volume came through
Monday as the Manor Care shares followed through, notching their second second
new high, this time on nearly 1.8 million shares, more than twice the stock’s
usual trade.
Auto-nation
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AN |
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PowerRating) is basing. For those of you swing
traders who seek earlier entries, note the mini asymmetrical triangle in
formation. Note the rising support levels and rising relative strength line,
which has moved higher quite nicely as the stock has consolidated.
Remember that all securities are risky. In any new
trade, reduce your risk by limiting your position size and setting a protective
price stop where you will sell your new buy or cover your short in case the
market turns against you. For an introduction to combining price stops with
position sizing, see my lesson, Risky
Business.
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