Weeding Out The Weak

One key to the long base, or
consolidation, is a dry-up of volume through the body of the pattern, indicating
that weak holders are slowly being ground out of the stock. Then the stock comes
alive on the day of the breakout, sometimes a day before breakout.

The latter instance caught my eye in
the prior session and put Atlantic Coast Airlines
(
ACAI |
Quote |
Chart |
News |
PowerRating)
on my
base-building radar. The stock broke Thursday on even heavier volume. The
consolidation area starts on April 18.

Skechers
(
SKX |
Quote |
Chart |
News |
PowerRating)
tried to stand its
ground, putting in a bullish engulfing pattern. Any of you still holding onto
the stock, either whole hog or after taking half profits?

Genzyme
(
GENZ |
Quote |
Chart |
News |
PowerRating)
is consolidating
nicely.

All stocks, of course, 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
.