Hi - if you say a stock is extended, that means don’t buy (chase), right? And maybe trim some if you own it? Also, stocks on your ready list sometimes have buy points below the price they’re currently at. I’d maybe buy if it’s less than 5% over your buy point, but otherwise you’d generally wait for a stock to drop back down to around the buy point in order to buy?

When I say a stock is "extended" that means that it has broken out of its base, and typically 5% or more above a pivot point is considered "extended."  That does not mean we forget about the stock as the stocks that breakout are usually leaders especially if they break out early in a new rally. I typically sell 1/3 of a position if the stock has run up 20%-25% from the buy point. Typically, stocks will form new bases after a 20%-25% run.

The market conditions are the most important criteria when making an entry into a stock. Currently we are 16 weeks into this rally which is unusually long. Many of the leading stocks have broken out and are "extended." If we want to own a leading stock like ALAB TSLA RDDT or AVGO we must do so when they pullback to a moving average and find support. They are not going to setup in a base right now and give us a nice base and provide us a pivot point.

ALAB is a good example of a leading stock that is extended from its base. However, it is clearly finding support at its 10ema and bouncing at that moving averages. It closed Tuesday 6.9% above its 10ema and is likely to come back down to its 10ema once again. Wait for the pullback before entering that stock. We must wait for the bounce as one of these times it will not find support and trade below its moving averages. This is a leading stock trading with momentum and this market is currently rewarding these types of leaders.

RDDT is similar to Astera Labs (ALAB) in that is is consistently finding support t at its 10ema. We need to have th discipline to NOT buy when it trades higher, and wait for the stock to pull back before buying.