Regular readers know that big bases can lead to big breakouts…
This price pattern is characterized by a relatively tight trading range following a large move up or down.
Not much happens inside the base, and there isn’t much opportunity for profit trading within a base.
However, these bases are where large, institutional investors accumulate massive amounts of stock.
When the big players are done accumulating all the shares they can and there is no more supply coming to market, that’s when the big moves happen.
And the real money is made when a stock finally moves out of a base, especially if it’s the stock’s first breakout…
So, today I’m going to talk about two stocks that fit this profile and could be setting up for major moves ahead…
Breakout on the Horizon
I mentioned recently that solar companies are starting to set up nicely for potential bullish trades.
In particular, JinkoSolar Holding Co., Ltd. (JKS) is a stock I’ve had my eye on for a while…
As you can see, JKS is not a new company, but it is still waiting for its first big breakout.
The stock experienced a big crash and rebound in its early days, but it then fell into a six-year base that formed between 2014 and 2020.
Then, in late 2020 and into 2021, JKS made a huge move out of that base and jumped to a new all-time high at $90.
Ever since then, the stock has cooled off. But it’s now setting up in a year-long consolidation range above the original breakout point.
This could set the stage for another major move. And once shares find their way to new highs, things could get interesting fast.
Fundamentals Play a Part
Now, in addition to looking for a strong technical setup, fundamentals also play a part in big base breakouts.
As a company goes through a slow period, its stock will usually fall. But as things turn around, so does the stock, and it will usually start to move back up again.
This is how many bases are formed.
But if a company can really get its business going and the fundamentals start to accelerate at a faster and faster pace, that makes a big breakout all the more likely.
And that’s what I think we’re seeing with the popular toy-maker Funko, Inc. (FNKO).
Take a look at the accelerating sales and earnings growth rates in the table below…
The company is growing faster and faster over the past few quarters, which is a great sign.
Furthermore, as I mentioned above, the base stage is when big institutions and funds will take large ownership positions in stocks for a longer-term move.
Well, take a look at the increasing number of funds that have taken positions in FNKO over the past few years…
This is another big vote of confidence for the stock, as more and more funds are putting their money to work in FNKO.
All Shapes and Sizes
From a technical perspective, the base in FNKO looks a bit different than most…
The weekly chart above could be interpreted as a large, inverted “head and shoulders” pattern.
The left shoulder formed back in 2018, the head formed at the low in 2020 and the right shoulder formed from the very tight consolidation range the stock has seen over the last two years…
But really, it’s all part of one big base, with a strong horizontal resistance boundary overhead.
The stock is already pushing up against that level, and I’m expecting a big breakout that could turn into a multi-year move.
Therefore, I decided to take a position in FNKO this week…
On the daily chart above, I’ve marked my entry point at $24.99 and my stop level at $22.90, which is pretty tight right below Tuesday’s low.
While I do think it can make a big, longer-term move, I am still keeping my stop relatively tight given that this market environment has been extremely choppy lately.
In a market like this, I’d rather miss out on some upside than allow this idea to turn into a loss.
I’ve also pointed out the strong bullish volume that’s been showing up on the chart lately.
There were a few big spikes back in May and June that accompanied big percentage moves in the stock, and we’ve seen higher-than-average volume during the big up-days this week as well.
All of this leads me to believe that FNKO should follow through if it can break above resistance.
I’ll do my best to keep you updated on this idea as the trade progresses.
The Next Big Payday?
Now, speaking of big bases and massive, long-term stock runs…
Remember when most folks missed out on investing in Microsoft (MSFT) when it first went public?
Well, today, my colleague and expert trader Josh Martinez has a system that “marks” stocks that could have enormous potential…
Just like Microsoft back in 1986.
He lays it out all right here… You don’t want to miss it!
Embrace the surge,
Editor, Stock Surge Daily