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The importance of strong volume after a breakout cannot be overstated. Volume is the fuel that drives prices higher, as it was with the astonishing ascent of Hansen Natural s price shown in Figure 9.12. When volume is going up at the same time as a price is going up, the market is saying that more and more people are willing to pay increasingly higher prices. As it does this, media and other attention is focused on the stock. In some cases, just as some people are famous for being famous, some stocks go higher simply because they are known for going higher. This is sometimes called the greater fool theory, meaning that buyers of the stock realize they are paying an exorbitant price for it, but they are con dent a fool greater than themselves will be willing to pay an even higher price, as so many have done before them. The increase in the price of Hansen Natural Corp. (symbol HANS) was so amazing that it warrants a closer examination with respect to the volume change. Looking at Figure 9.13, you can see that the price broke above its former resistance level of $3.50 after having traded below that price for many years. Notice that volume did not instantly explode higher. After a breakout, sometimes the volume soars, and sometimes it doesn t. The market may be acting with caution toward a stock such as this, even after a breakout, simply because it has been so inactive and unexciting for so many years. The area highlighted with an oval shows when volume of the stock did nally pick up. There could be many reasons for this the recommen-

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where J = /kT and h = H/kT. Assume the model has a critical point at T = Tc corresponding to a critical coupling Je Let

(18,2)

QN(h,

Note:To delete an index entry, select the XE field (including the braces that surround it) and press .

t) ==

e-Ng(h,t)

e-E{s}

(18.3)

*1. P. Kadanoff, Physics 2, 263 (1966). 441

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dation of a popular newsletter, or the buy rating of a major analyst who initiates coverage of the stock. No matter what the reason, the explosion in volume is going to get just as much attention as the increase in price, since this is the market s af rmation that it believes in the new direction of the stock and is willing to put its dollars behind the movement. One of the real tricks to recognizing patterns is to be able to do so before you have much perspective. In other words, looking at a multi-year chart, it s easy for most people to spot patterns that took place long ago. But being able to discern a pattern when it actually completes is much more dif cult, because often the scale of the chart makes the pattern not very obvious. Look at Figure 9.14 and notice that the price action is relatively messy (it s even messier without the clarity that the horizontal line helps bring to it). In retrospect, one would see this was a rather clean breakout from a saucer pattern, but at the time this breakout took place, it would not have been nearly as easy to discern. The other challenge with buying breakouts is that once the pattern completes, the stock might seem too expensive. Figure 9.15 provides a nice illustration of this. In this instance, the stock struggled for years, nally pushing its way from $7 to $22 before it nally broke above a very well-formed saucer. Many people at the time would think twice about buying such a stock, since it had already moved up over 200 percent. The paradox is that this is in fact the ideal time to purchase the stock, since it

.net code 39 reader

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.net code 39 reader

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