Everyone loves discounts. Unfortunately, targeting securities merely based on their low price can often lead to succumbing to valuation traps. In other words, cheap stocks are that way for a reason – typically not a good one. And that sucks in retail investors who have been initially tantalized by the allure of a discount gone bad.
A better approach may be to find robust investments that are currently “baselining” in a consolidation pattern. Barchart provides just such a screener for the job. Called Upwards Base Consolidation, this tool filters for securities that have previously exhibited a strong upward trend but are presently consolidating near their market top. It identifies possible sideways price congestion that could lead to a breakout move.
