The stock breaks out of a basing chart pattern, but weekly volume is less than the week before, or volume is less than 50% above the stock's average over the past 50-days (The average volume is illustrated by the line moving across the volume bars.) This indicates lukewarm interest at a pivotal point for the stock, and it could later become a failed breakout.

Climax Tops

The stock, after a strong run-up for several months, reaches a "climax top" in which the price suddenly goes up even faster — 25% to 50% or more on heavy volume in a couple of weeks. The price spread for the week will be greater than on any prior week since the beginning of the stock's major move. Sometimes this run will culminate with the stock's largest single-day advance since it began moving up. As the name implies, this is a situation when a buying spree in a stock becomes too obvious and everyone is excited by the price action. When it's obvious and exciting, it's too late — sell into the euphoria.

Related Resources:

Review IBD's 20 Rules For Stock Market Success.

Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.

Search our archive of Ask Bill O'Neil Q & A's organized by topic.