Investor's Quiz: Vocus' Stock Action Provided Reasons To Stay Aboard Despite Pul

Such a violation is often a signal to sell. But in this case, savvy investors who bought near the 16.35 buy point 18om its October 2006 breakout should have held their shares.

Why? Vocus (NasdaqGM: - ) broke out of a six-month cup with handle in the week ended Oct. 13 (point 1). The handle, which is harder to see on a weekly chart, started forming two weeks before the breakout. Volume dried up (point 2), just as you'd like to see.

Just after the breakout, though, the stock started to ease gently. When it pulled back to its 10-week line (point 3), it was down nearly 8% from the buy point.

Some shareholders may have gotten out here, using their 8% automatic stop-loss rule. Since this is right on the threshold of that sell rule, you might have looked at a daily chart and seen the volume was well below average.

The light-trade action indicated that the big money wasn't rushing for the exits. So you could've waited to see if it rebounded. Had Vocus pulled back on heavy trade, though, selling would've been smart.

Holding, in this case, paid off; the stock bounced back the very next day. It surged 25% to a new high on huge volume after its third-quarter profit topped expectations.

But five weeks after hitting a high, it fell below its 10-week line on light trade (point 4). It closed tightly over the next two weeks, a sign of support.

At its low during those weeks, the stock fell nearly 5% from the initial buy point, not enough to set off a sell signal. The pullback again occurred on low volume.

Those who hung in there likely noted a base in progress -- a base Vocus cleared the week ended Jan. 12 on heavy volume (point 5).

At the bottom of the base, volume increased without further price deterioration. That also was a positive sign. From the breakout, Vocus rose as much as 67% to a July 25 high, after finding support at its 10-week line multiple times.