The Stocks need a base from where they take off. It's like long runway on which stocks have to run before a flight can take off in a grand style.
Here's a Microsoft story to help you understand the above
I covered Microsoft technically on Feb 09 2016 titled - "Understanding Gap". The article talked about how Microsoft now has a new support level of 48
Just see in the chart above - how it took more than 6 months for stock to make a base at 48 before taking off just now.
How it all happened?
Microsoft after a long time broke out above 48 in October 2015
— Deepak Singh (@smarket) October 24, 2015
The breakout was backed by market's belief that turnaround is for real
The Power of trend matters. Market now believes in Microsoft story. Just look at the stock...minimal damage in current market correction
— Deepak Singh (@smarket) January 9, 2016
Microsoft has turned around after 12-15 yrs by focusing on Cloud (Azure) and Surface (Tablet + PC)
— Deepak Singh (@smarket) January 29, 2016
Microsoft has started doing all the right things and stock movements now confirm it - A breakout and slow base building at 48 and now stock near HIGHS. That's how stocks take off in a big big way
The objective of writing this post was to illustrate how breakouts sometimes can be slow event but how eventually work out right. Lots of times, when stocks build a long base...the eventual move is even more powerful
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers