From there, it is just a matter of having the courage to ride the stock upward. TL3 (exit price at 40) shows a trend line that an investor could use to exit with most of his winnings intact. TL4 (exit price 50), connecting higher valleys, allows the investor to capture more profit, but risks a premature exit. I show TL5 as an example of a premature exit. TL5 is a steep trend line drawn along the bottoms. This trend line is similar to TL4, but it takes an investor out of the stock at 25 when E peaks at 73. One last tip is to recognize the measured moveup pattern from D to E. If the first leg is supposed to equal the price and duration of the second leg, you can predict where price may peak. Switch to the linear scale so that vertical distances are the same, not the log scale, if you do this visually. The first leg begins at 7.99 and ends at the corrective phase high price of 32.57 for a height of 24.58. The second leg begins at a corrective phase 145 146

Fundamental analysis and Position trading low of 19.77, suggesting a target price of 44.35. Price actually peaks at 73, so the prediction missed it by a mile. On a time basis, the first leg begins the week of 7/14/06 and ends 12/8/06 (the start of the corrective phase, not the date of the corrective phase high), for a duration of 147 days. The second leg begins on 6/29/07 and 147 days later would be 11/23/07, about three weeks short of the actual peak the week of 12/14/07. That is not a bad prediction considering the measured move is 17 months long. Trend lines can be invaluable when trading humped 10baggers.

Line Shape The next 10bagger shape is what I call the line shape, and I show an example of it on the weekly scale in Figure 15.7. The 10bagger ends at B (near the top of the chart), and dividing the price by 10 says it begins at A. Of course, we can see that price actually bottomed a few weeks before A. Price climbs the chart following a straight trend line, hence the name line shape for the pattern it makes on the chart. S O N D F M M J J A S O N D A F M M J J A S O N D A F M M J J A S O N D A 2002 2003 2004 2005 Figure 15.7 a 10bagger follows a straightline upward. 59 51 45 39 33 29 25 21 17 15 13 11 9 7 5 3

Trading 10Baggers A lineshaped 10bagger follows a straight line upward until the end. The line shape is the type of 10bagger investors dream of finding. Buy and hold the stock until it stops climbing and then dump the turkey. Price peaked at 64.20 and a close below the trend line would have signaled an exit at 51.95, assuming a sale at the open the next week. That is a bit of a give back (19 percent) from the peak, but it is not bad. One significant measured moveup chart pattern appears along the trend, which I show as CDEB, highlighting the major turning points and keeping proportionality in mind. Since this is a measured move up, you can use the same measuring technique described earlier to make a prediction of where price will peak. Running through the computations, I found that the peak was supposed to end on 10/22/2004 at 44.78, but the 10bagger actually ended on 11/26/2004 at 64.20.