How to Identify good momentum burst and make millions | stockbee

1/04/2014

How to Identify good momentum burst and make millions

Momentum Burst Basic Logic

Stocks move in momentum burst of 3-5 days
Stocks move in 8 to 40% bursts
Stocks move in 5 to 25 dollar burst if priced higher than 40

For more details see this post on momentum bursts: Stocks move in short term Momentum Bursts



How to Identify good momentum burst


A good momentum burst candidate will have following characters:
  1. The day prior to range expansion day will be narrow range day or negative day
  2. The stock will have 3 to 20 days consolidation prior to range expansion day
  3. The stock will have series of narrow range days prior to breakout
  4. On breakout day volume is higher than previous day
  5. On breakout day stock closes at or near its high for the day (preferred)
  6. Stock is not extended. First or second breakout at start of an up trend is preferred.
  7. Stock should have linear and orderly move
  8. A very volatile stock exhibiting drunken man walk kind moves should be avoided
  9. Low float below 25 million is good. Below 10 million float leads to explosive moves
  10. Low priced stocks (below 5 dollar) tend to make very explosive moves of 40% kind in 3 to 5 days.



Become an expert in momentum burst setup
Identifying good setup is a skill developed through practice. If you go through 5000 to 10000 old setups and identify good from bad and see what worked and how it worked, you will gain expertise in identifying and trading these setups in real time.


More time you spend going through past history, more efficient you will become in instantly identifying setup in real time without trying to remember the rules. Automaticity or procedural memory is developed through solved examples and practice.


Go through hundreds of setups daily. Try and identify good setups on them. Study what was the pre breakout situations. Study how it acted post breakout. Find out how much % move it made in 3 to 5 days post breakout. Study failed breakout.

Your objective should be to become an expert in this setup. If you do that you can make millions of dollars over your trading life time. In a year you will find 500 to 1000 such setups on bullish and bearish side. This is one of the setups I use daily along with other setups.

Methods and philosophy


20 comments:

tradingcell said...

Hi stocbee, love your posts! Just curious on these momentum burst plays, when do you enter a trade, what time frame do you look at and when do you get out/stop out?

Thank you

rugulach said...

what is the indicator on the bottom
you are using for breakout signal?

Pradeep Bonde said...

I enter on first day of range expansion. I run scan through the day and enter as and when stock shows up in it and meets my criteria listed.

I exit on third to 5th day depending on setup or exit partial position and trail remaining part.

The entry signal scan is c/c1>1.04 and v>v1 and V>100000.

tradingcell said...

SO do I get it right, you enter based on a daily chart and don't go into smaller time frame for execution?
And if need to stop out, do you stop below the daily candle (the first one that pop out of range extension)?

Pradeep Bonde said...

Yes and yes.

Saurabh Shah said...

Hi, very precise description!

Recently, I was stopped out twice from CSII even though it seemed to be meeting most criteria (if it didn't please point out, I could be wrong).

I guess probability is just a part of the system and we need to cut losses diligently.

That said, if CSII breaks out again properly, I'll definitely try to ride it :)

Pradeep Bonde said...

CSII did not meet my breakout criteria in last six month.

Sam Chen said...

Hi,

What are your criteria for those high price stock because it is not very common for them to have +4% breakout?

Pradeep Bonde said...

For them I look for c-o>=.90 and v>100000

cloudsandskye said...

"For them I look for c-o>=.90 and v>100000." What is c-o>=.90?

Pradeep Bonde said...

Close-open is greater than 90 cents and volume greater than 100000

rugulach said...

can you pls answer my question?

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Pradeep Bonde said...

Rugulach it is the entry signal scan c/c1>1.04 and v>v1 and v>100000. When stock meets the condition it shows it in green.

Delwyn Wee said...

Dear Pradeep,

In your selection process, how would you shortlist your candidates? I have noticed that the examples you have provided are usually at multi-months highs. Would you consider range expansion for a stock that had fallen from a previous high but experiences a range expansion?

I'll use a crude example - DHX. The stock fell hard last Nov but is presently flat. Assuming that it turns up on your screen with a range expansion to the upside, would you consider the trade?

Pradeep Bonde said...

While I prefer stock with established momentum, I also will take stock that have corrected if they meet my setup definition. As this is just a short term swing trade any good quality setup is ok for me.