Great Stocks Often Pull Back After Breakout.(A)(INVESTOR'S CORNER)

Byline: Jonah Keri

Krispy Kreme Doughnuts has dazzled investors in the last month. Other than afew sideways slides, the stock has soared higher and higher, leaving its base in the dust en route to a 55% gain from its May 7 breakout.

If you nabbed Krispy Kreme, pat yourself on the back. But if you chose a stock that broke out only to fall back to its pivot point, don't fret. Many of the market's greatest winners do that before blasting off to huge gains.

Historically, about 40% of big gainers have fallen back to their pivots. In a market like today's, where we're fresh off a savage bear crushing a roaring bull, stocks can be even choppier. More than half of all breakouts are likely to stumble before making their runs.

Say you buy a stock as it breaks out. It acts well for a few weeks, then suddenly turns tail. How do you know when a stock's worth holding or headed fortrouble?

As always, follow your rules. Your only no-exception sell rule is when a stock falls 7% to 8% from your buy point. Having that safeguard in place lets you limit losses and hold out longer for big winners.

What should you do if your stock sinks to its pivot, but no further? Give the stock time, particularly if the market is in good shape. It may take several weeks, even months, for a stock to prove it can become a big winner.