I missed this SWING trader gives an example of this setup..
02-Mar-12 SWING Swing Trader: The failure of failure -Update One of the lowest risk ways to make money in a bull market is to watch for entry in a strongly uptrending stock that pulls back, or fails, and enter at a low risk point where it appears the failure itself has failed. Many of the trades I've recommended of late have had at least an element of this. But one we spoke about recently but didn't take illustrates it perfectly.
Take a look at ZNGA's daily chart. Off of earnings price gapped lower on 2/15 and closed in truly ugly fashion on big volume. Price took out a consolidation area, chasing out many latecomer longs. But it didn't violate the base from which it sprang and the next day something interesting happened. The failure was arrested. Price didn't trade any lower in spite of the widespread disappointment in the report and innumerable analyst comments and newspaper columns that the business model was in question, that growth was slowing. The low risk entry was on 2/17 over the 2/16 high with a stop under the 2/16 lows. The fact that ZNGA is an IPO in an exciting new space helped, as optimists are ready to price in the slightest hint of good news. Alternatively chasing this move to new highs is hard to recommend for any but the shortest term trade. The stock is well extended from its last base and could be choppy, shaking out the weakest hands, meaning the latecomer that buys this break out. With a stock that's on the move, in a market that's on the move, buying the failure of failure, and exercising a little patience, can be its own reward. (LEARN)