Page 1230 - How to Make Money in Stocks Trilogy

212 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Alternative Buy Points

The cup-with-handle, double bottom and flat base are the main patterns
that launch big runs. But what if you miss those breakouts? Don’t worry. All
is not lost!
The big winners will typically form alternative buying opportunities. You
can use these to initiate a position in the stock—or add to your position if
you did catch the breakout.

Less Is More

Since these are secondary buy points, it’s a good idea to buy a smaller posi-
tion than you would from, say, a cup-with-handle. That’s especially true if
you’re buying more shares in a stock you already own. In that case, you
always want to buy fewer shares than you purchased in the initial breakout.
That keeps you from running up your average purchase price too much.
Here are two of the most common alternative buying opportunities.

3-Weeks Tight

Like a flat base, this occurs after a stock breaks out, goes up for a while, then
pauses to digest those gains.
As the name implies, it only takes 3 weeks to form. Here are the key
points:

■ ✔ Each weekly close should be within about 1% of the prior week’s
close.

That’s what creates the “tight” range you see in the chart. Remember to
focus on the weekly closing prices. During the week, the share price may
move around a bit, but you’re focused on where it closes on Friday.