In our most recent webinar, the MarketSmith team discussed an advanced buying strategy developed by one of the most revered investors of all time.

Jesse Livermore, who was widely known as “The Boy Plunger,” discovered a rare pattern that could provide an additional entry point when initiating a position. The “Shakeout + 3” chart pattern is usually seen in double bottoms, but calls for an earlier entry point, which lowers your average cost. As investors, we need to use every advantage we can when trading; the more base patterns we identify, the more opportunities we have to make sound investments.

Let’s use the example above. At first glance, the chart pattern appears to be a traditional double bottom; however, the Shakeout +3 pattern allows for an earlier entry. The stock should be purchased when it rises three points above the first low on strong volume. The psychology behind this base is that institutions try to shake-out weak investors by testing the demand of the stock. Later, the same institutions will try to accumulate shares at a lower cost.

Remember, this is an advanced buy point, so risk should be adjusted accordingly. Start off with a smaller position and add when volume proves the demand.

If you have any questions, you can reach us  (800) 424-9033 or at reachus@marketsmith.com.

Best returns,

The MarketSmith Team