When a stock breaks out on huge volume for a couple of days and only moves the price a little, what does that mean? (October 23, 2001)

  Assuming the stock broke out of a sound pattern on heavy volume, the key is whether it holds at the pivot point or not. Usually a heavy volume breakout will propel a stock higher within a few sessions, often on the day of the breakout. The pivot point is the point of resistance that once broken, should hold as support even if the stock does not immediately race higher. If volume was good, we want to see it hold at that point and then start to move higher. If it does not, a few things can happen. One, it can start another base right on top of the one it just broke out of. That is often a flat base; once it is completed the stock often heads to much higher gains. We want to see that base on good price/volume action. If it churns on high volume, i.e., going nowhere on high volume after a move up, that means there are a lot of sellers at that point; the increased buying cannot overcome the selling. That usually means further selling is coming. Again, however, the key is whether the stock holds above the pivot point after a strong volume breakout.


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