When performing technical analysis, there are certain setups you will learn to love. Bases, which form over weeks, months, or even years, allow a stock to consolidate over time and prepare for its next major move higher. Spot the right base and your portfolio can easily see 100% returns of more in a short amount of time.
I have offered multiple examples of these in the past, and today I wanted to focus in on Brigham Exploration (BEXP) which had great five month run after breaking out in late 2010. The stock ran for 118% before peaking out in March of 2011.
The key points on this chart are as follows:
- Identifying the proper buy points. Knowing the right time to buy into any stock is critical because it allows the trader to minimize risk and maximize potential gains.
- Identifying support along the way. Higher lows, moving averages, and key accumulation days all serve as identifiers of support as a stock creates its base over time.
- Identifying follow up buy opportunities. Once a stock breaks out, over 50% of them pull back to their bases to find support. This can create either a base on base setup or a simple bull flag. Either can be used to pinpoint a follow up buy point to grab more shares of stock at a competitive price.
Below is a full sized stock chart of BEXP. View the full chart, which will fill up most of your screen, and take some time to look at all the points:
Finding winners like BEXP is not an easy task, but with time any investor can learn to identify these bases forming. In this instance, BEXP is an Oil & Gas explorations company which was in a hot uptrend at the time of its breakout. Investors following the CANSLIM philosophy should remember that:
- Follow the overall market
- Identify key trends (what's hot)
- Find the best stocks within these groups (fundamentally and technically)
- Buy these stocks on breakouts, sell the losers, and let your runners run
More stock chart examples and lessons below.
- Example 25: A Great Example of a “Clean” Breakout Yielding 50%+ Returns
- Example 24: A Closer Look at SINA’s 2010 Breakout and 200%+ Run
- Example 23: Brigham Exploration (BEXP) <–- Currently Viewing
- Example 22: How to Spot Bull Flags that Return Huge Profits
- Example 21: How Akami’s (AKAM) Stock Chart Foretold its Earnings Miss
- Example 20: 6 Lessons / Reminders From My 23% Profit in EZCH