Should the 50- and 200-day moving average lines be considering a stock breaking out of a base?

Not necessarily. In some cases, when a base is predominantly horizontal in shape, the moving average lines can be more or less flat. But rather than looking at the slope of the moving average lines, you should check if the stock is above its 50-day moving average. If it isn’t, chances are there is something wrong with the breakout. Also, you’ll sometimes see the 50-day moving average cross above the 200-day line at about the same time of the breakout, although this crossover is not by itself a signal to buy. Overall, the overriding factor in studying any breakout is the health of the base pattern. Moving averages are just a secondary indicator.

Chart Of The Day – TCS Stands Tall in Weak Market

TCS rallied 4.5% after the buyback window closed on Friday. Unaffected by weakness in markets, TCS hit an all-time high today. The Company has strong fundamentals with accelerating earnings and revenue growth. The stock has a Price Strength Rating of 92 and is currently trading above all key support levels.

Tata Consultancy Services_MarketSmithIndia

How General Market Correction Causes a Post-Breakout Shakeout

There is always a strong chance of a CAN SLIM quality stock giving excellent returns to the investor after a successful breakout from a proper base.

But, sometimes breakouts fail miserably. A stock clears a buy point, then falls 8% below the buy point soon after. Following our sell rule, designed to protect hard-earned capital, you cut losses short. Continue reading “How General Market Correction Causes a Post-Breakout Shakeout”