Back on September 14th I profiled Ancestry.com coming out of a beautiful cup and handle base. It really was the first safe buying opportunity since the IPO last December. This stock is setting up its first add on buy point on a Three Weeks Tight (3WT) base pattern. A 3WT base is simple when a stock closes tight, +/- 1%, on a weekly chart for three consecutive weeks. Its is a sign that institutions are supporting the stocks and sellers are scarce. The 3WT pattern usually occurs after a stock has seen nice price appreciation. Since ACOM is now up 24% from my purchase, I am looking for an opportunity to add to this position. The pivot point or add on opportunity is 10 cents higher than the previous three weeks high or at $28.46. What is very encouraging is this 3WT is after two weeks where ACOM announced secondary offerings which usually can destroy a stock and its chart. Additionally, the general market was weak last week with the Nasdaq down close to 3%. Yet, ACOM again closed the week tight. This is very bullish and constructive behavior for a young stock. However, one of the most important factors in buying or adding on to a position is VOLUME. Volume is the key and I am looking for a 50+% increase over its 20 day volume average to confirm. Without the proper volume signature on a breakout, I will simply sell the add on shares at days end. ACOM announced their quarterly earnings recently where their earnings were up +167% and sales grew +39%. Additionally, they confirmed and raised guidance for the entire year. Equally important, ACOM is see increased sponsorship of its stocks by the institutional community.
I like to use weekly charts as it provides the best opportunity to evaluate where a stock has been and may go. The weekly chart is impressive as you will notice all the big volume up weeks verses the low volume down weeks. Also, ACOM has a 15% short increased which may be some gas to the fire if it can break out to new highs.
Please do your own due diligence when making stock decisions and always use stops when a position goes against you.
