IBD Investors’ Corner is a series or articles that explain the rule, concepts and approaches that IBD uses to guide their style of trading. All that info can be found here…
Investor’s Corner | Investor’s Business Daily
I will use this thread to post links and summaries of articles that I find timely to our discussions.
I recommend everyone go scroll through the list to see the kinds of articles they post. I used to cut these out and save them when I would get my neighbor’s used IBD newspapers.
How To Use Powerful Breakaway Gaps To Buy Potentially Big Stock Market Leaders
We have seen a lot of breakaway gaps in this market as companies are beating low expectations this quarter. This article may be helpful.
Summary:
Breakaway gaps — when a stock gaps up so strongly in price that it rises past a proper buy point — are powerful breakouts. The unusual power signals the stock’s upside is likely just beginning.
[There is an embedded Video with example of Medifast gap up.]
But it’s not too late to buy a stock even when it gaps up so much that it totally misses the 5% buy zone. You just have to adjust the buy point. Specifically, use the high price of the first five minutes of the gap-up, which you can find with a five-minute intraday chart in IBD MarketSurge or your brokerage. Buy shares as close as possible to that price and no more than 5% above it.
There is often a correlation between power and distance. The more powerful the breakout, the higher the stock tends to go.