Spot this Setup for 100%+ Returns

When performing technical analysis, there are certain setups you will learn to love. Bases, which form over weeks, months, or even years, allow a stock to consolidate over time and prepare for its next major move higher. Spot the right base and your portfolio can easily see 100% returns of more in a short amount of time.

I have offered multiple examples of these in the past, and today I wanted to focus in on Brigham Exploration (BEXP) which had great five month run after breaking out in late 2010. The stock ran for 118% before peaking out in March of 2011.

The key points on this chart are as follows:

  • Identifying the proper buy points. Knowing the right time to buy into any stock is critical because it allows the trader to minimize risk and maximize potential gains.
  • Identifying support along the way. Higher lows, moving averages, and key accumulation days all serve as identifiers of support as a stock creates its base over time.
  • Identifying follow up buy opportunities. Once a stock breaks out, over 50% of them pull back to their bases to find support. This can create either a base on base setup or a simple bull flag. Either can be used to pinpoint a follow up buy point to grab more shares of stock at a competitive price.

Below is a full sized stock chart of BEXP. View the full chart, which will fill up most of your screen, and take some time to look at all the points:

Click to Enlarge

Finding winners like BEXP is not an easy task, but with time any investor can learn to identify these bases forming. In this instance, BEXP is an Oil & Gas explorations company which was in a hot uptrend at the time of its breakout. Investors following the CANSLIM philosophy should remember that:

  1. Follow the overall market
  2. Identify key trends (what’s hot)
  3. Find the best stocks within these groups  (fundamentally and technically)
  4. Buy these stocks on breakouts, sell the losers, and let your runners run

More stock chart examples and lessons below.


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