Short Base Breakout Failure

Note:  The historical stock examples given below are for EDUCATIONAL USE ONLY.  They ARE NOT to be used to make buy/sell decisions in today's market.  For more information, please read the HSR Terms of Use.

Description

This price behavior unfolds in four (4) steps:

Step 1:  Price has a sharp move higher that's often punctuated with wide range and heavy volume.

Step 2:  Price consolidates sideways for 1-4 weeks.

Step 3:  Price breaks out to new highs for 1-3 weeks.

Step 4:  Price fails and reverses back down below Step 1's high.

Behavior Note:  Step 1's price action will sometimes show signs of distribution (stalling, price reversal, etc.) or euphoria (buying climax).

What you need to know

After a sharp rally, the next immediate move out of a short consolidation may be a trap to lure investors into a stock that's under distribution.

This may be confirmed if price quickly reverses lower after breaking out to new highs (Step 3).

Historical Stock Chart Examples 1A & 1B:  K Swiss (KSWS) 1999

Please >>CLICK HERE<< to go to the next price behavior within Topping Behaviors.