Coffee Anyone? When To Buy GMCR and JVA

 

On Thursday, GMCR exploded higher after announcing earnings.  But rather than buying it on a gap up and chasing a bus, GMCR gave traders and investors an ideal buy point in early June:

 

Two questions:

1. What is the overall trend of this stock?  The answer is up as the uptrend is defined by the green lines.

2. What happened in June?  The stock pulled back to trend channel support as shown by the pink lines.

The ideal time to buy GMCR was a break above the pink line.

Now let’s take a look at JVA which was just featured in our newsletter:

 

Here we have a stock that like GMCR in June has pulled back off of its highs towards support at the 50-day moving average.  It triggered a long side trade by breaking above the pink Pullback Off Highs line.

In an uptrending market, the Pullback Off Highs pattern is the only pattern you need to know.  That’s what we look for and need to see before we make a trade.  Rather than chase a bus, buy stocks that have pulled back to support and where the deck is stacked in your favor to benefit from a meaningful move higher.