Investor's Corner: Spotting The Buy Point: Fourth Try A Charm

That was the case with GPS device maker Garmin (NasdaqGS: - ), which staged several unsuccessful breakouts before finding success in May.

After vaulting out of a base in late February 2006, the stock ran about 47% to a high of 50.94 before it started to consolidate gains in May. With the benefit of hindsight, a broad-based correction was looming on the horizon.

Garmin shaped a short six-week double-bottom pattern during May and June. Ideally, double bottoms take at least seven weeks to form, which may explain why this breakout didn't get very far.

The stock passed its buy point 20he middle peak of the "W") the next week (point 1). Amid strong head winds in the market, the stock climbed 11% before turning lower.

Shares lost ground for five consecutive weeks, mostly on big volume, slicing their 10-week moving average. Garmin headed even lower before finding support at its 40-week moving average (point 2).

From there, it built the right side of a new base, but big buyers were few during this time (point 3). It forged a handle during the week ended Oct. 20, giving a buy point 20 51.80 or 0.10 above the Oct. 16 high.

The breakout from that cup-with-handle pattern didn't last. Volume on the breakout was barely above average -- a sign of weakness. Soon, the stock retreated to its 40-week line again (point 4 ).

Garmin's next try came on Valentine's Day of this year. A well-received fiscal fourth-quarter earnings report sent shares vaulting out of a six-week cup pattern (point 5). Unlike most other bases, six weeks has been shown to be long enough for cups-without-handle bases to work. The stock jumped 8% that day to a record high of 59.30.

Once again, though, things soon turned sour, as a meltdown in the Asian markets triggered a global stock market sell-off in February.

Garmin dropped over 9% during the week ended Mar. 2 and pierced its 10-week line. Volume, however, was only a tad above average (point 6).

The next week, the stock dipped near its 40-week line, but turned around, finishing a bit higher.

It spent the next several weeks lingering around its 10-week line on well-below-average turnover.

Buyers appeared to return during the week ended April 27. Shares rose 6% on slightly heavier-than-average trade and came within striking distance of a new high.

Garmin continued to look promising early the next week where shares hit a new peak of 59.70 (point 7). However a revenue miss and a disappointing guidance handed the stock a 5% loss for the week on a big surge in volume (point 8). The down move set up a high handle with a 59.80 buy point.

Finally, sellers stayed away. Shares edged higher, supported by its rising 10-week line.

Garmin cleared the buy point 14 May 23, rising 3% on more than twice its average trade.

Garmin ramped higher for nine of the next 11 weeks, many of those on healthy volume (point 9).

On Aug. 8, the stock hit a record high of 105.75, for a gain of about 77% since the breakout. It's pulled back amid stock-market weakness.