I don’t like buying breakouts. The chart of CRMT shows why that is. Look at the breakout back in July. If you bought it you would have been back to that same price level where you started in just a couple of months. If you were patient, maybe even putting in a buy order at the close of the breakout, look at how nice a run you would have had.
I always like to think in terms of weak and strong hands. During the breakout, CRMT was being held by a combination of weak and strong hands. While the stock pulled back in price it was slowly shaking out the weak hands until the price got all the way back to the breakout level where a final spike down got rid of the last of them. Now the stock was ready to move up because it was being held by people with high risk tolerance and higher conviction.
You have to be patient and wait for the correct buy points. I wouldn’t buy CRMT now, for example, I would wait until it pulled back to the most recent breakout level. It might take days or it might take months, but being patient usually pays off.
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