The beauty of the stock market is investors can buy a stock any time they want. The problem for investors is, they can buy a stock any time they want.
The stock market as we know it, has been in operation for over 150 years. It started with a handful of commodity traders under a buttonwood tree in New York City. They formed the Buttonwood Agreement which was the foundation for the first stock exchange in North America.
150 years of data has given investors a lot of science to work with.
There is one particular point in a stock's price trend that we refer to as a break out. Our research has shown, the break out is the most significant single session event in the price trend.
A great deal of information on markets analysis is made available for investors in the Investor Tool Kit. Bases and break outs is the one section flagged more than anything for investors to study. The use of bases and break outs is profound for investing in the stock market.
Two stocks have suffered a significant break down at a pivotal point in their price trend (see below). In both cases these stocks appeared to be undergoing break outs. But the break outs have failed and the selling that follows has been very heavy.
When stocks, en masse, are undergoing break outs the stock market is healthy. When failed break outs become rampant, the stock market is entering a correction.
How to avoid stock market trouble
An investor could use these two examples, apply the observation and make some stock buys. But there is something wrong in the break outs in both ZUMZ and SGMS. Can you spot them?
Unfortunately, investing is not the simplest endeavour. Making distinctions based on the science of stock buys has greatly improved investor success.