Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Bullish pullbacks

leave a comment »

Ok, ok. How could a stock retreating actually be bullish? When it hints at further upside. Here’s an example:

Koppers Holdings (KOP)
KOP - Koppers

The Box A highlights a broad four month flat base. (Keep your eye out for stocks that are consolidating in price while growing their earnings. ) The breakout into new high ground at Point B is accompanied with heavy volume (Point C) a very good sign.

The stock made a nice advance over the next two weeks before starting an orderly retreat. Note the stairsteps at Point D accompanied by decreasing volume at Point E. Even the big downward spike at Point F was the result of volatility at the opening and the stock climbed up the rest of the day.

It’s helpful to note that the stock fell as low as about $27 at that opening. That $27 was important because that was about the top of the base from which that the stock had just emerged. The resistance at the top of the base became support as the stock advanced. This happens often enough in the market that you should include it in your quiver.

This example is also a case in point in why you want to keep a stock on your watchlist even after it breaks. Don’t hang your head low about “missing” an opportunity. It will knock again.

Advertisements

Written by heyercapital

May 22, 2007 at 3:29 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: