Chase Price Gaps Out Of Bases With Caution.

Byline: Christina Wise, Investor's Daily

Investor's Business Daily Trying to buy a fast-moving stock can be like catching a train that pauses for only a moment at the station. Jump on at the right time and you get the ride you paid for. Jump on at the wrong time and theresults can be less than desirable. When shopping for stocks, look for one that has formed a healthy base of seven weeks or longer. The ideal time to buy is when the stock breaks out of that base and hits a new price high on heavier volume than usual. That is known as a stock's buy, or "pivot," point. Chasing astock that's already 5% or more past that point can be a wasted effort. Because you've missed some of the initial gains, you have less of a cushion to ride out a normal pullback in price. But not all stocks give you the luxury of a leisurely purchase. A stock may open and trade several points above the previous day's intraday high. This price movement, also known as a gap, can occur for many reasons. There may have been some positive overnight news, such as healthy earnings. Or maybe a mutual fund decided it was time to snatch up a load of shares. Whatever the reason, demand is so strong in the morning that the stock opened above the previous day's trading range, creating a bullish gapon a price chart. So what do you do if you wake up and the stock you've been eyeing greets the day higher than the buy point you've set? Aside from finding out if there's any news on the company, you should also reconsider the stock's fundamentals. f the numbers are strong, consider buying a small stake - ...