To qualify as a power play, the following criteria must be met:
- An explosive price move commences on huge volume that shoots the stock price up 100% or more in less than 8 weeks. This generally occurs after a period of relative dormancy.
- The stock price then moves sideways in a relatively tight range, not correcting more than 20 to 25% over a period of 3 to 6 weeks (some can emerge after only 12 days).
- There is very tight price action that doesn’t correct the stock more than 10%, or the stock must display volatility contraction characteristics.
- These setups can move the fastest in the shortest period of times; velocity begets more velocity. This pattern often signals a dramatic shift in the prospects of a company.
- With the power play, the stock is exhibiting so much strength that it’s telling you that something is going on regardless of what the current earnings and sales are showing you.
- They are ‘hard’ to buy as the correction is short in time and shallow in depth.