Stock Breakout Q&A View Select Entries from Our Mailbag. Also See Our Q&A Page.
Q: I recently got a membership to GSA and was hoping you could help me identify stocks a little bit a head of time before they breakout. I really like your service...and not just gamble in the market.
My main problem is that I prefer to find a stock that has based a long period of time, more than 2 months with lower volitility and watch it the last week to two weeks or so as it prepares its breakout to see how it is trading. I believe that if you watch how a stock trades you can get a more accurate feel for when to sell the stock. That being said I'm having a very difficult time finding any companies on the list that aren't listed very poorly or not at all that are basing in this manner. Can you identify a few for me to watch that have been buliding a base for quite some time or is the market just as a point that most stocks have already broken out somewhat and may need a few months to re-base?
Also, i have been getting conflicting information based on the listings on the Database EPS growth in previous quarters and as compared to the previous year and moreover how the undervalued and overvalued aspects are determined.
If you could help me in any way i would appreciate it! Thanks for your great service and I hope to find some real market leaders to invest in for the next few months to few years.
It is our opinion not to try to predict when a stock will breakout. We could be following stocks that are in a basing pattern that might continue for weeks or even months. Wouldn't a better strategy be to jump in on a stock that has demonstrated a positive breakout, and focus our efforts there? That's just our opinion and our approach. I tried analyzing our database to see if there was a filter that could do what you were requesting, and could not come up with an easy answer. The best strategy would be to cycle through all our charts in the Chart Fest section, and visually look for the basing pattern. I did a quick visual scan and found AHMH, MRVL, ECLG as some with short-to-medium bases. Sorry to not offer you a better solution at this point.
You are correct about the market not offering up too many basing stocks or breakouts. It has been a great year for us, with several stocks having already made significant runs. Maybe we'll consolidate a bit, then find other bases and breakouts.
Let us know which specific EPS growth numbers you are finding to be conflicting and we can investigate more. There may be some errors in data, which we have no control of. The undervalued and overvalued calculations are described on the Help page. Basically it looks at the Forward 12-month PE divided by the Projected 5 yr Growth Rate, expressed as a percentage. The calculation is shown on our Help page under "Stock's Discount".
Apologize again to not offer you a better response on your basing strategy, but trust us - wait until the breakout. It will save you time and energy and will channel your money into those stocks that may have demonstrated the beginning of a good move.
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