I came into this week pretty confident that SXCI and ALXN would both break out of the bases they had been building. SXCI had been working on a Second Stage Flat Base with a length of 41 days and a depth of 14%. ALXN had been working on a Fourth Stage flat base with a length of 51 days and a depth of 14%. Both have rock solid fundamentals. I liked SXCI a little bit more because it was an earlier stage base.
On Monday morning, both stocks rocketed out of the gate on very impressive volume. Then they started acting differently. SXCI maintained its strong volume as the price fell all afternoon, eventually closing one cent below where it had opened the day. ALXN maintained its price strength all day, but let volume fade to +30%. This is short of the +40% volume IBD recommends.
Both stocks fell in price today. This is a classic investing lesson. Just because everything sets up perfectly doesn’t mean the stock will follow through. This is why we never try to sneak into a base early. We always wait for a stock to break out on big volume BEFORE we buy.