I presume I'm not the only MarketSmith to get forced out of FRAN today following their 7-8% loss sell rule. With my rear-view glasses on, still licking my fresh wounds and asking where I went wrong, I offer the following thoughts.

 

I should have suspected the base-on-base pattern from the start and not selected this for my "Ready to MOVE!" list, rather keeping it on my universal watch list. I generally put stocks in my "Ready to MOVE!" list that I will buy without hesitation if the breakout looks sound (strong price and volume action). The first base looks sound enough with volume decreasing on the left side of the base and drying up at the bottom followed by strong volume increases on the right side of the first base. However, in the second base volume increased on the left side and decreased on the right making it a faulty base.

 

On the breakout day the stock rocketed 10.7% in volume 183% over average. I allowed my excitement to get the better of me ("Oh look at that...a stock that I picked on my list just broke out strong!!). I decided I needed a stake of that action to the tune of 25% of my portfolio. I pyramided in along the way with the first 50% stake up first, the next 30% when it increased 2%, and the final 20% at the next 2% increase.

 

My lesson learned: don't buy breakouts from faulty bases no matter how strong the breakout.