12/19/2014

Hunting for momentum bursts


NLS is the kind of setup I like to look for and trade . The stocks had high volume breakout yesterday and showed up in momentum burst scans.

The fundamental nature of swing moves in market never change. Market moves in short term impulse moves of 8 to 40% magnitude. One very good thing about these sharp moves is that they happen in just 3 to 5 days time frame.

From an active swing trader point of view these kind of moves offer you ton of opportunities in a year while keeping your risk per trade very low. Catching several hundred such momentum bursts is a strategy which I use. These kind of swing trades are easy to find and trade in bull market.

NLS, LNKD, NTES HAR  LMT RSG were some of the good setup showing this kind of momentum breakout yesterday. 

12/18/2014

Range expansion candidates from yesterday

With market bouncing hard post the Fed meeting , lot of stocks had range expansion. It was buying feast as many stocks that held up well during correction found buyers.

Data is example of kind of stocks I was buying yesterday. It had orderly sideways move during the market correction. It was not at all dented by overall market weakness in last few weeks. It also had momentum and Trend Intensity was above 105 indicating buying interest. Stock had breakout yesterday and offered good entry early.


To find candidates like DATA you have to actively look at setups from stocks with established momentum. Everyday I scan for stocks with Trend Intensity above 105 and look for stocks setting up well. During the day I run Range Expansion scan on that universe to look for stocks showing range expansion. As soon as good candidate shows up I buy. Swing trades like these offer several hundred opportunities in a year.

Other stocks I bought yesterday were  HF and INFN . Both of them had similar pattern to DATA.

Another kind of trades to look for during market corrections is pullbacks. BABA is an example of that . I bought BABA 2 days ago once it reversed slightly from an orderly pullback.


If you want to be successful swing trader you must develop your setup ideas and scan for them daily. Money making opportunities show up if you do that. 

What happens to breadth at turns

A breadth thrust starts new up or down move. A breadth thrust is rapid and dramatic improvement in breadth in short 2 to 3 days periods.

Yesterday we had 531 stocks up 4% plus on high volume. An average up day will have around 100 stocks up 4%. So yesterday was 5 times the average. If we get another big day like this in next 2 days it will change the breadth trends from negative to positive. Many times turns can have over 1500 stocks up 4% plus in just couple of days.

Big breadth thrusts are seen at most turning point and show buying pressure. Big breadth thrusts after a multi day drop in markets can be first sign of buyers stepping in big.

But in a protracted bear markets like we saw in 2008 to 2009 , there can be many big  up days that go nowhere.

Breadth thrust are very commonly used tools by traders to time market turns. Again if you skillfully use them then you can develop an edge. They give you early signal during turns.  

12/17/2014

Using breadth to reduce drawdowns

One of the trick to using breadth for reducing drawdowns  is to use it as anticipation tool rather than a reactive tool.

The easiest way to do that is to use extreme breadth values. You have to know ahead of time likely turn that way you can close positions at profit and not react once 3 to 5 big distribution days have already happened. If you follow those kind of methods you will invariably be late on both bullish and bearish side.

That is where the skill in using breadth models is. Data on breadth is freely available and if you can use it skillfully to stay ahead of the game you will have less drawdowns and less psychological problem. Drawdowns waste mental and financial energy. It wastes time as you have to spend time recovering from loss.

The best use of breadth is to find extremely bullish or bearish breadth situations. Those tends to be unsustainable and give you early warning signal.


After 4 to 5 distribution days everyone knows market is in correction mode, but if you can anticipate that ahead of time you have an edge. It might be small edge but it is worth studying and acting on. 

12/16/2014

How to use breadth to determine market conditions

Ample warning from breadth . November last week signalled breadth weakness and since then market has had trouble going up.

Market Breadth is study of number of stocks participating in up or down move. When you see breadth deteriorating and high volume selling it indicates likelihood of short setups working . When market turns breadth turns , if market were to start rallying , breadth trends will first quickly turn from negative to positive.

Positive and negative moves in market start with breadth thrust. If you study historical breadth thrusts you will notice that at turns in short time window lot of buying or selling happens.

There are many ways to monitor breadth and there are hundreds of breadth based indicators and some very well known breadth models. If you want to be on right side of the move and avoid large drawdowns incorporating breadth in your trading plan will help you.

As we are for last few weeks in down trend shorts have worked.

12/12/2014

To become profitable trader think setups

If you develop the ability to think in terms of setups , you can shut out all noise.

Once you think setup your mind will work in terms of pre defined process flows and trade selection and management criteria.

Then you don't need to worry about what any Noah Sophia Liam Emma Jacob Olivia Mason Isabella William Ava Ethan Mia Michael Emily Alexander Abigail Jayden Madison Daniel Elizabeth Mark Peter Dan or James thinks about market or an ETF or stock.

The day you can do that you will have graduated to higher level in trading.

If you have a well defined setup trade show up in your method and you buy them or short sell them. You exit the trades at appropriate time as defined by your setups.





Both of these trades are part of Stockbee Momentum burst setups. They triggered and showed up on setup scans at right time. 

If you understand the Momentum Burst setup you can find these trades on your own. You know how to manage these trades , where to enter, where to put stop, where to exit and so on. If you understand the method and study in depth, you can do this on your own.

Start your new year with a setup thinking emphasis and develop setups .

If you want to be position trader study position trading setups and perfect them

If you want to be swing trader study position trading setups and perfect them

If you want to be day trader study position trading setups and perfect them

Atop following others trade and concentrate on setups, that will make you independent trader