First a slight clarification about this whole fresh ATH theory…
By fresh ATH, we mean a stock clearing previous all time high posted in past few years. Here we don’t mean all time high posted last week or last month. For fresh ATH to be meaningful it has to be a few years ATH.
Now usually we have three kinds of outcomes once a stock clears its multiyear ATH.
It either blasts off and registers gains of varying proportions, say 30-50-100% once it clears ATH.
Other is that it goes slightly above ATH, then comes down to retest the zone in and around ATH and then resumes uptrend to post decent gains.
Third is it clears ATH by varying degree and comes down and starts a major correction.
We are interested in stocks which give good returns post clearance of ATH. The most important parameter to look out for to figure of these kind of breakouts is to lookout for strong consolidation either slightly below ATH, or in and around ATH and then a breakout. These are the kinds of situations which give the perfect launching pads for strong upmoves post clearing ATHs.
I assume we are discussing above type of scenarios.
The other scenario is that once a stock clears ATH, it establishes a firm strong uptrend and keeps posting fresh swing highs (technically its an ATH, but I prefer to name it swing high just to differentiate it from multiyear ATH breakouts. Here there is a breakout, then stock posts swing highs, then consolidates for some time sideways and then starts a fresh upmove. Guys like Minervini use these kinds of consolidations and fresh breakouts to move in and out of the stocks, besides riding the multiyear ATH breakouts.
I prefer to look out for bigger movers post ATH or 52 week high breakouts. These often take time in the form of long sideways movements, or slight corrections, but when the call goes right, returns are also big. And once I start enjoying the upmove I usually don’t give up my positions quickly to get in and get out and aim for the intraswing moves. But if someone has such skill and mindset, it can be attempted. Not my cup of tea.
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