A stock will not always carve out a quiet, controlled uptrend. But some turbulence isn’t all that bad, either. A shakeout can serve stocks well. It is generally a sharp sell-off that causes scared traders to dump their positions.

This could involve a wild one-day swing caused by bad news. Sometimes a shakeout occurs in the absence of news. Regardless of the reason, a good setup stock with support by Smart Money will be accumulated back at lower price.

Based on the chart above, we notice how usually Smart Money will shake out all the weak-hand holders by removing the supply before break new high. Smart Money will test the supply at support level and buy back the stock at lower price from the weak-hand holders. Once the subsequent bars close high, Smart Money are ready to mark-up the price higher with least resistance.