|Tiger Path #4 - How To Make 25% A Year - (C)
2006 William Schmidt, Ph.D.
Buy Highest Accumulation Price Breakouts
above Well-Tested Resistance
This is the most exciting approach to making money in the stock
market. It also affronts the common sense edit of "buy low" and
"sell high", because if buys "high" and sells "much higher". When
using this approach it is vital to be able to correctly reckon where
resistance is in a stock. TigerSoft produces an automatic Buy B10
signal that catches most of the most important breakouts. Look at
our study of the best performing stocks in 2005 and see how often
a Buy B10 occurred early on. Spikes of very high Accumulation
before or at the time of the breakout are highly correlated with the
best gainers. Look also at the charts in this study and note the AI (Accum.Index)
spikes and the B12's and B24's. They are the basis of the sixth Path.
Price Resistance here means a line drawn through 3 or more peaks.
This makes that price level "well-tested". The flatter the resistance, the
more reliable the breakout. All stocks do have such breakouts. But those
stocks having "high accumulation", as Tiger measures it, are more likely to
make extended advances and so have more numerous and more powerful
breakouts. It is these breakouts which the alert trader can readily capitalize on.
Stocks showing high accumululation become more and more "tightly held"
as they move back and forth in a trading range. Eventually, they "breakout".
Prices shoot past the expected resistance. Volume rises. Shorts cover and
new Buys can't wait any longer for another dip. Notice how on our charts
high volume produces a red price-bars. This is a handy confirming signal.
After the breakout, prices rise quickly in most cases. With stocks making
all-time highs, prices can rise dramatically.
Tiger's software easily finds for you all the highest Accumulation
stocks at well-tested resistance or those making new high-breakouts. (This requires
the TigerSoft graphing program ($295) and the Tiger-Power-Stock-Ranker ($295)
Or we can find such stocks each night for $575/year and post them on the internet
for you, along with an explanation of each trade. You can get all the Tiger and
Peerless software, all updates for a year, all our books and a year's subscription
to the Hotline Services for $995.
There is some judgement required here. Nevertheless, in a strongly trending
overall market this is a very profitable form of trading.
The hardest part is knowing when to sell. Taking quick profits when gains
reach a certain amount, 10% or 20%, is fine and it is good for the ego.
But in the early stages of a general market advance, the high accumulation
stocks that breakout often will move up 50% or 100% or more. Many times
breakouts push stocks up to a rising upper trendline that becomes well-tested.
The Tiger upper bands can be used, too. Waiting for a reversal day
on the rally, where the stock closes near the lows of day on high volume
or with a gap is another way to judge when to take profits. TigerSoft has
many refined tools for this. Suffice it to say here, that subscribers are given
ample notice when to sell, but they should not be surprised if the stock sometimes
continues to rally. There will always be another stock to board.
There is a risk: stocks do have "false breakouts". In these cases, the breakout
fails to advance 10% from the point of breakout and then falls back below the
point of breakout by 2%-3%. That is where we suggest taking a small loss.
If the stock suddenly reverses and turns up smartly and makes another new
high, we may buy it back. But usually we are on the look out for "well-bahaved"
stocks, namely, those do not show such wild and unruly behavior.
In the chart just below you can see how AAPL's stock made classic breakouts
above clear-cut resistance lines. And when it did, the stock moved up sharply
afterwards. This behavior is surprisingly common when the right technical
conditions are present. Our software's Help Routines and our Nightly Services
will help you understand these conditions so that you can eventually apply them
yourself. We also recommend your getting Explosive Super Stocks by William