Pfizer gained 4.7% after the Company appointed Milind Patel as the new CFO of the Company. As a result, the stock hit a new high and closed 27% above its pivot price of Rs 2,369.80.
Should we Buy Stocks Breaking Out of Bases with High Depth?
The first point to clarify is that “”resetting the base count”” does not
mean you can buy a stock that’s rising out of the bottom of a base.
After a stock goes through a correction, whether major or minor, you
should wait until it breaks out near its old high before considering a
purchase.
In general, you should start recounting bases after a major correction
that is usually the result of a bear market. A quality stock may correct
40%, 50% or 60% over a number of months, thereby clearing the
slate for a new advance once the market improves.
Stocks that collapse 80% to 90% or more, however, may be damaged
beyond repair. You’re probably better off avoiding them.
Chart Of The Day – Sun Pharma Shines At The Bourses
What is the Alternative Buy Point in Quality Growth Stocks?
If you miss a good stock when it breaks out, the 50-day moving average offers a second chance. Quality growth stocks with good institutional sponsorship often find support around this line, which tracks a stock’s average price over the prior 50 days. That’s because mutual funds and other big investors may add to their positions when a favored stock pulls back to or just below the 50-day. The first such pullback offers the best opportunity. The more extended a stock gets from its initial breakout, the higher the chance of a sizable correction.