Growth Investors: The CAVA Chart Is the Perfect Reminder
If you ever needed a real-world example of why we do NOT hold once a breakdown begins, CAVA is it.
This was a textbook CANSLIM winner with triple digit earnings growth, double digit sales, strong RS, and institutional sponsorship. Everything a model book stock should have.
And yet, the chart still went through all four stages exactly as Weinstein describes:
Stage 1: Base with early accumulation Stage 2: Strong advancing trend Stage 3: Loss of momentum and choppy distribution Stage 4: Breakdown followed by a sustained downtrend
The most important lesson?
Stocks tend to go much higher than we expect in Stage 2 and much lower than we think possible in Stage 4.
This is why successful growth traders sell weakness instead of hoping strength returns.
Fundamentals did not save it, and at the time of the breakdown the earnings and sales still looked great with +150 percent EPS growth and +28 percent revenue growth. The story did not save it. The theme did not save it.
Only price saves you, and price clearly told you when the party was over.
The chart is the final judge.
Use CAVA as a reminder of this rule:
There is no good stock except one going up in price.
And as William O’Neil famously said: “All stocks are bad unless they go up.”
You only want to participate in Stage 2 uptrends.
