How to deal with pull back (兼答令狐冲）

Question: From the chart, you mentioned that add more when pull back, my questions is : After break out, How do you identify it is PullBack, not BreakOut Failure? If it goes below the break point, then you sell it quick, however, since you add more during pull back, then, it becomes even game.

Answer: You are right that it is very hard to decide whether it's a pull back or breakout failure. The key factor is the volume. If the volume is light and it hold the pivot point then it's PB2. If it is on very heavy volume and break down the pivot point then it is a BKFS.  That's why most of time I only buy TP1 and BK5 states or some time RS2. See the following chart of KBH which is a good example.




If a stock is really strong then it will not touch the breakout point or pivot point again like LVS did on 11/08/2006.
During the past few days it all had PB2 state. This is where I would add some more. Today it tried to break out from this little consolidation area and failed right way. If i bought today, I would sell them all. If I bought on the breakout day I still have some room maybe wait whether it could hold the small red support line. If it breaks down under it, all my position would be gone.





Goog broke out from 500 and didn't touch it so for.




ICE broke out on 11/14 and also never touches it again. I bought some on 11/13 which was a RS2. I was lucky to get in but did not hold very long and missed the big money. The past few days are PB2 so it's not a bad idea to buy some if the market is still strong and this group still gets money flow in.




I bought on the break out day and right now there is no sigh to sell it.







On 11/10 Rimm undercut the breakout point which is at 119 and did not closed below it.