Monday, August 5, 2013

Would You Buy This Stock?

Below are 2 charts with very similar patterns.  Both have made big moves and recently experienced significant gap ups on very strong volume.

To the seasoned trader, both of these charts look extended and in need of a rest to consolidate the gains that have been made.

Here's the first chart.  The stock has already made over a 170% gain just in the time frame shown on this chart.

                                                Stock A




Now here's the second chart.  It has advanced over 180% in the 7 months shown in the chart.

                                Stock B



So what are these 2 stocks that made these big moves?  Do you own one or both of them, or are they at least on your radar screen?  (I altered the prices and volume numbers to disguise their identity)

The first chart shown is Tesla Motors (TSLA) as of the close on May 10 of this year.  Since that time the stock has advanced an additional 84% as of today's trading.

Here's an updated chart of TSLA.

The second chart is Yelp Inc (YELP) as of Friday's close.

The point of this post is not that you should buy a stock that is extended in price from a proper base structure, but rather not to dismiss the stocks that have already made big moves.  If you do, it's possible you'll miss out on the very best performers going forward.

Will YELP continue on as TSLA did?  No one knows.  But it should definitely be on your radar.


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