Virtually everyone has heard the cliche "buy low, sell high." What many novices have a difficult time wrapping their minds around is that often times the best time to buy is when a stock is making a new all time high. William O'Neill (Investors Business Daily) did a lot of research in his younger days about the best performing stocks of all time. Time and time again, the chart pattern was a flat base of several months or longer followed by a rocketship bull run.
These days, almost everyone can spot a "cup-n-handle" formation, and there are distortions as people try to jump the trade. Market makers may try to goose a stock to give a false breakout. I am not going to tell anyone that it is easy. However, the flat base followed by a breakout remains one of the most bullish chart formations, even after books being written about it, and seminars given about it. This is unusual, often times when something new is documented it ceases to work because people anticipate it and trade ahead.
I'm keeping my fingers crossed on my PDLI. The stars are lining up for earnings on Monday. There is a chance for a rocketship take-off, a chance for a fizzling dud non-event, or the chance of a spectacular explosion and wreckage. (Like my position in Amazon a few weeks back.)
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