The major indices are up between 10-12% with leading stocks running since the 9/01/10 follow through day. We know that historically, leading stocks will rise 20-25% during a healthy uptrend before correcting. With this in mind it isn’t surprising to see several leaders beginning to drift sideways and down, as they consolidate their gains. We have noticed many stocks forming “Three Weeks Tight” and “Flat Base” patterns. This presents us with valid entry points where we can redeploy any cash raised while taking the profits made from other positions over the last 6-7 weeks.

 

Baidu, Inc (BIDU) is a great example that was discussed in Investor’s Business Daily last week. BIDU has the requirements we look for in a base that’s beginning to form. The article pointed to BIDU’s uptrend of more than 20% and a consolidation area that began 4 weeks ago. Does anyone out there see any other examples of leading stocks presenting similar consolidation areas?

 

Best Returns,

 

Your MarketSmith Education Team