Page 1205 - How to Make Money in Stocks Trilogy

188 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Breaking through that resistance on unusually heavy volume shows insti-
tutional investors are back in the game, aggressively scooping up shares.
• Shakeout: Remember how the handle in the cup-with-handle shook out
the weaker holders? You have the same concept here, just in a different
place. Note how the bottom of the second leg in a double bottom under-
cuts the bottom of the first leg. That gets rid of the weaker holders, leav-
ing more committed investors who create support for the stock’s new run.

Here’s a quick list of the key traits to look for in a double bottom.

■ ✔ Prior uptrend: 30% or more

■ ✔ Base depth: 40% or less

■ ✔ Base length: At least 7 weeks

• The first down week in the base counts as Week #1

■ ✔ Peak in middle of “W”
• Should form in upper half of base
• Should be below left-side peak
■ ✔ Undercut: Bottom of second leg down should be lower than

bottom of first leg down

■ ✔ Ideal buy point
• 10 cents above the peak in the middle of the “W”
• Buying range: Up to 5% above the ideal buy point
• Always buy as close as possible to the ideal buy point!

■ ✔ Volume on day of breakout: At least 40%–50% above average

Launching Big Gains with the Double Bottom

Below are examples of winning stocks that launched big runs from a double
bottom.
Again, don’t rush through these examples. Study what the patterns look
like on both the daily and weekly charts, and look for big spikes in volume
on the breakouts.