Ask Colin

I was hoping that you would be able to inform me as to what your strategy would be in this situation: A stock as broken out of its accumulation period, and you purchase the next day. Following your trading pattern, you await a correction to purchase your second lot, but the stock continues to trend up. In other words, no correction below you original entry comes. Is there a point at which you would decide to purchase more without a correction?

The short answer is no. The best place to buy is on the correction after the initial breakout. However, as you observe, some stocks just never pull back. These are the ones I deal with by buying on the initial breakout. Just in case they don't ever correct. I just go with the initial position. It would be nice to have bought more, but then these are fairly rare situations. Just be thankful we have an initial position. My experience is that if you buy another lot on a straight up move, Murphy almost guarantees that you will buy the high and then see the correction you had given up on.

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