But the dangers rise along with the altitude. Investors should be wary of stocks that are far beyond their initial base camp. But stocks can renew themselves. After the market has corrected for several months, and then turns around, stocks will begin shooting out of bases. Count that as a first-stage breakout.
Most investors are wary of jumping back into the market after a correction.
Plus, the stock hasn't done much lately, so many investors won't even notice the breakout. A four-week or other brief pause doesn't count. A stock should form a healthy base, usually at least seven weeks before it qualifies. Don't count that as a second stage. When the stock breaks out of a second-stage base, a few more investors see it's making a powerful move.