When a stock breaks out of a consolidation, you may feel that it’s past the point where it’s a bargain, and you missed your opportunity to buy low. But that’s not necessarily the case.
Rather than focusing on beaten-down stocks, more successful investors understand the advantages of waiting to purchase until the stock is in an uptrend. That can improve your chances of seeing a gain, rather than watching your stock languish.
A breakout happens when a stock’s price moves beyond a previous area of resistance, which is simply a price at which investors balked at sending the price higher. Sellers take profits at that point, which the stock sometimes hits repeatedly before eventually moving higher.
You can identify an optimal buy point by looking at the area of consolidation on a chart, and watching to see if the stock can pass a high price, preferably in heavy trading volume.
Bio-Techne manufactures clinical diagnostic products, including systems for identifying and characterizing the Covid-19 virus.
The stock marched steadily higher in recent months, advancing 39.17% year-to-date and 74% over the past year.
A prior run-up is a good signal of previous institutional support. It’s not usually the case that big institutional owners will suddenly bail on a stock, so that support indicates prior conviction.
Bio-Techne formed a series of bases since May 2020, resetting its base count last September as it fell beneath its prior structure low. Its most recent consolidation was a second-stage base that formed below its April 28 high of $443.96.
Shares rallied to $450.78 on June 14, albeit in low trading volume. Since then, shares pulled back slightly, and are down 0.36% for the week. The stock is currently holding above its 10-day moving average.
Big institutions have confidence in the stock; the number of mutual funds owning shares rose from 705 to 800 in the most recent quarter. That’s a good indicator that more price gains may be ahead.
J2 Global provides online communications services as well as operating e-commerce brands, including Mashable, PCMag and Offers.com.
On June 15, the stock broke out of a cup-with-handle with a $128.93 buy point. Turnover was more than double the average.
Unlike other companies that zoomed quickly higher in the 2020 rally, J2 Global took its time climbing out of a long correction. The stock is up 33.35% year-to-date and 75.61% in the past year.
It began shaping its most recent base in April of this year, forming a handle earlier this month.
Analysts expect earnings growth in the next two years, following revenue and earnings acceleration in the past three quarters.
J2 Global confirmed the breakout Wednesday, advancing 2.35% to close at $133.33.
Here, too, the number of mutual fund owners has been rising, growing from 632 to 682 in the most recent quarter.
InMode is an Israel-based company that makes radio-frequency devices used in cosmetic surgery and other medical procedures.
In late April, the stock began shaping a cup pattern, adding on a handle a month later, with a buy point of $87. On June 7, Inmode gapped up 5.05% to clear that buy point in more than triple average trading volume.
It finished that week with a gain of 8.10%, and is essentially flat so far this week.
This was another stock among many that began its price recovery very quickly after the big 2020 pullback. The stock advanced 193.10% on a one-year basis, and 88.65% year-to-date.
At this juncture, the stock is slightly out of buy range, as it’s risen 5.4% beyond its handle buy point. Investors could squeak by with a buy, but it’s probably best to wait for a pullback with support at a key moving average, such as the 10-day or 50-day.
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