Allis Chalmers (ALY): Advancing Through the Volatility Cycle
Volatility Squeezes often lead to dramatic price moves that can generate some very solid returns in a short period of time. But these moves never run in a straight line, and will often test the breakout.Let’s take a look at Allis Chalmers (ALY).
Notice how the stock traded in a tight range during the latter half of March and into early April. The stock then broke out above prior resistance at $17 and quickly ran to $19. It then traded sideways again for most of May, never testing the breakout level with a pullback to $17. That was a sign that the stock still had plenty of buying pressure behind it.
But when it subsequently broke above $20 just a couple of weeks ago, the stock did fall back to test the breakout level. That was the chance many of the bulls were looking for — they quickly bought the stock and it’s on the move once again.
If you like trading Volatility Squeezes, try visiting my website, The Stock Market Mentor for a Free Two-Week Trial. We have an active section devoted specifically to Volatility Squeeze Candidates.
—Dan Fitzpatrick
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