A Great Example of a “Clean” Breakout Yielding 50%+ Returns

While many breakouts are harder to detect and catch at the right time, others are relatively clean. A clean breakout is defined as one that has a clear cut pivot point, and once the stock breaks out it does not pull back to its breakout area. While these setups typically take longer to develop, they are every investors dream.

In this example, Grace W R (GRA), a manufacturer of specialty construction chemicals, broke out of a 7.5 month base in October of 2010. The stock never pulled back to its original buypoint (pullbacks gives all CANSLIM traders chills of being knocked out early), and over the first 8 weeks climbed up to hit the 20% return mark. The stock has since peaked at over 50% from its original breakout.

Before analyzing the stock chart below, make sure to take note of these key points:

  • GRA made very clear its resistance, $30.20 – $30.30 early on in its base which allowed investors to easily identify the proper buypoint of $30.40.
  • Volume surged well above its average on its breakout day, marking a heavy accumulation session.
  • The stock never returned to its pivot point after breaking out even though there was a pull back.
  • In orange, the left side of the base is clearly identified. This also lead the stock to form its bottom.

With these key points aside, GRA’s stock chart is below with analysis (for help with CANSLIM investing, read my article 60 Stock Tips for Investment Success and consider some William O’Neil books).

Further stock chart examples and lessons below.


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