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We often write about stocks that test their breakout prices. Stocks breaking to new highs or out of consolidations often come back to test the breakout point before continuing with the breakout. This is most likely due to certain investors taking profits. If the breakout is a strong one, buyers come back in at some point before the stock falls below the breakout. This starts the stock back up on the next leg. This test can happen the next day, or it can happen after a week of upward movement. That is why we advise those in on the breakout move to watch for a test. If the stock has had a good move, you don?t want to lose profit on a big test-you can always get back in when the stock moves back up. For a small test soon after the break, you can ride it down, but you have to be careful the stock does not fall back within its previous trading range. Good breakout volume is a sign that this is less likely to happen. There are two plays on the breakout test: when the stock turns back up on good volume, or when the stock tops its breakout high. The former is riskier in that the breakout high can act as resistance, but we will play this move if the other indicators are good-volume, money flow, relative strength. The safer play is the break over the recent breakout high as this shows there is no resistance. If the volume is still good, the stock will most likely continue its breakout.

A securities firm or a registered investment advisor affiliated with a firm. Brokers are the link between investors and the stock market. When acting as a broker for the purchase or sale of listed stock, the investment advisor does not own the securities but acts as an agent for the buyer and seller and charges a commission for these services.

A market in which stock prices are rising.

A false signal which indicates that the price of a stock or index has reversed to an upward trend, but ultimately proves to be false.

Stocks that don’t qualify for NASDAQ listing are traded here or by Pink Sheets. Be careful.

Any day from Monday to Friday, excluding statutory holidays.

A trust that usually generates cash flows from one business or operating company, unlike an investment fund, which generates income from a diversified pool or portfolio. The trust holds debt and equity interests of an operating business. Businesses that exhibit these characteristics may opt for a trust structure over a corporate structure to take advantage of tax efficiency.

Analyst working for mutual fund or other institutional investor. We don’t usually get to see their reports.

If a broker fails to deliver securities sold to another broker on the settlement date, the receiving broker may buy the securities at the current market price of the stock and charge the delivering broker the cost difference of such a purchase.

To an economist, capital means machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.