It's not a good feeling when a stock takes off without you. Investors who follow IBD trading rules have a 5% window from a buy point to buy shares, but many times a stock will blow past that in a hurry.
On rare occasions, a stock will give you a second chance to enter soon after an explosive move up — via a short-stroke pattern.
When they do form, pay attention, because they can lead to strong gains. This is especially important if they are formed by leaders with top-tier fundamentals.
Most of IBD's buy patterns take several weeks to form. For example, a cup with handle needs at least seven weeks. A flat base takes at least five weeks to form.
But a short stroke needs only two weeks.
A short stroke starts with a big weekly surge, generally 15% to 20% or even more. This can be the week of the breakout or some time soon after.
On the second week, the stock can finish either higher or lower. But it generally doesn't make a new high. The defining characteristic is that the second week is an extremely tight range, where the distance between the weekly high and low is only a fraction of the previous week's price swing.
The narrow action of the second week resembles a stroke of a pen, hence the name of the pattern.
Some investors may be reluctant to buy after the big first week, but the psychology behind the short stroke is resiliency. The stock hardly budges, meaning that investors are in no hurry to take profits.
Volume should be lighter in the second week than in the first. To get the buy point, just add 10 cents to the intraday high of the first week.