What to do When A Stock Breaks Out

WOW! A breakout of a base let’s BUY BUY BUY right?

Not so fast.  Before you just get impulsive look at the chart below that really shows the breakout action.

As you can see, you had all of about 30 seconds to pick this name off in the 96 level. But ever place an order to buy in a fast market? Odds favor you don’t get the instant execution and odds favor you’d have got filled a lot higher than where you entered the order.  Our point to this is while it’s a breakout and that is a good thing you are now instantly chasing this stock. Don’t get us wrong, we like the pattern and confirmation of the breakout, but more often than not just sitting back and allowing a lower risk Pullback Off Highs pattern to develop or even an initial pullback is a much better trade.