Here is one I got stopped out of once it broke through the 50 day.

 

It seems like a stage 2 flat base formation of 13% depth, which is a common structure after the cup with handle 1st stage.

 

So in retrospect, I pulled the trigger, but what flaws did I ignore or dismiss?

  1. Volume didn't dry up as the base until the last week before the breakout. I would like to see more white under the 50-day vol avg.
  2. Although the base is above the 50-day, it tends to wedge up which is an issue because it means buyers are still outdoing sellers and not enough shaking out of weak investors occurred. Also notice how red it is (or magenta, whatever), even though action seemed constructively tight.

 

Despite all this, the stock broke out on very good volume (94% above avg) on May 6th and everything looked fine and dandy until a handle started to form 8% above the breakout. Now usually this is ok but note the increasing volume as the handle forms, which definitely means something is wrong. I missed this completely and didn't get out before the 5/20 meltdown. 

 

It happened so fast I couldn't get off the elliptical fast enough to sell and an IBD friendly loss turned into a 10% loss. 

 

So what's the lesson from this? Was the base too flawed to buy? Maybe, maybe not (opinions would be great!) but Leaderboard was sure into this stock and so was I.

 

In retrospect, I would've liked to have sold when it plunged below the 10-day May 16th on above average volume, however is this too tight a stop? 

 

So at least I got a bit more slim for my wedding this summer, but now I have to work a little harder to pay for it. ;)

 

Regards,

Mike