Tags: Stocks, Stock Market Guide, Stock tips, Stock Techiniques
A stock should be close to or actually making a new high in price after undergoing a price correction and consolidation. The consolidation (base-building period) in price could normally last anywhere from seven or eight weeks up to fifteen months.
As the stock emerges from its price adjustment phase, slowly resumes an uptrend, and is approaching new high ground, this is, believe it or not, the correct time to consider buying. The stock should be bought just as it's starting to break out of its price base.
You must avoid buying once the stock is extended more than 5% or 10% from the exact buy point off the base. Here is an example of the proper time to have bought Reebok, at $29, in February 1986 before it zoomed 260%. The second graph shows the correct time to have bought Amgen at $60—in March 1990—before it jumped more than sixfold.
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