How to find stocks like CALA and enter them before breakout | stockbee

3/01/2017

How to find stocks like CALA and enter them before breakout


CALA was a stock I highlighted today morning before market open as good anticipation setup. As you can see the stock is up 28% in a day. Do you want to find stocks like these daily and enter before they breakout?


Here is the entry trade on Tuesday afternoon before breakout on CALA (800 shares bought for  9 USD in 50k account with end of the day stop at 8.80 for a risk of $160 risk)

cala.PNG

I sold my CALA position by end of the day as it gave above normal profit in just one day.

The following scans and steps details the method to find these kind of stocks for those interested in making real money trading. The scans are using Telechart software.

To anticipate a breakout look at stocks currently not undergoing momentum burst.

Stock should be in extremely low momentum phase for anticipation .
It can be a shallow pullback or consolidation in established momentum phase.

To anticipate look for stock with extremely low volatility

A stock with low volatility in last 5 to 10 days is ideal candidate as part of a continuation setup.
Look for series of low range bars in last 5 to 10 days
Look for stocks with bollinger band squeeze.

Avoid Anticipation setups on extended stocks

First or second anticipation setup in established trend is best
Extended trends needs to be avoided for anticipation as failure is high on them

Look for early entry on anticipation candidates

Anticipating a breakout helps you get an early entry and can improve your per trade profits.
It also can lower your risk as your stop is closer.
It can help you profit from even smaller moves.
For that entry without waiting for breakout is best.

Anticipation requires more pre planning and effort than buying a breakout.

You need a process flow to do that.
The process should be efficient and done daily after the market close.
The suggested process flow is a template you can develop your own process.

Only 3 to 5 quality ideas should be tracked

"A" grade pre Momentum Burst setup should be your first priority
Once you have list of anticipation setups narrow them down to 1 to 5 for next day action.
Quality is more important than quantity

In order to find Bullish Anticipation setup use DT and TI 65 lists in Telechart

Double Trouble Scan

US common stocks
c/minl252>=1.8 and minv3.1>=100000
Price % change Today between 1 to -1%

TI65

US Common stocks
avgc7/avgc65>1.05 and minv3.1>100000
Price % change Today between 1 to -1%

MDT Above 1.19

US Common stocks
c/avgc126>1.19 and minv3.1>100000
Price % change Today between 1 to -1%

After running these three scan merge them together as some stocks will be common.

Go through the list to find setups that are setting up for possible b/o

What to look for in good anticipation setup

series of narrow range days in pullback/consolidation
orderly pullback with no 4% b/d during the pullback or consolidation
low volume pullback
low volatility during pullback
linear first leg if looking as continuation setup
Stock should go up smoothly and not in volatile manner
3 to 10 days consolidation/pullback
not up 3 days in a row
This entire process once setup tales just 20 minutes daily. 
You can find 5 to 10 good set ups using this process daily. In good market conditions these setups can make 8 to 20% in just few days. 
So if you are serious about making money swing trading setup these scans and practice finding good setups.
You can find your own stock picks daily once you master this method and perfect it. It will help you develop your own trading skill  and you will not have to depend on anyone. 

10 comments:

yogi said...

Hello

Great trade!
Amazing post on mechanics of trade, thank you!

Question?,...in terms of entry, did you buy "pre-market"
Thanks

Markus D. said...

Dear Pradeep,
Thank you for sharing and your detailed approach to it. That is one impressive trade indeed and I must admit, I missed it and was occupied by other trades. Since yesterday almost everything broke out or even gapped up, I can live with the result. The question is now, how many of those will reverse...
Anyhow. Knowing you actually don’t use the Momentum within a day for an entry, but enter even a whole day before a possible breakout clears up the process a lot. Especially on a day like yesterday, when most AS candidates also gap up above set trigger points.
I suppose sometimes it takes an additional day or two until the stock of an AS breaks out and you leave the trade on until then or you get stopped out?

Phillip K. said...

Can you explain what the following formulas mean? I am trying to program them in Stockcharts.com's advancs scan workbench:

c/minl252>=1.8 and minv3.1>=100000

avgc7/avgc65>1.05 and minv3.1>100000

c/avgc126>1.19 and minv3.1>100000

Thanks, and awesome post BTW!

Pradeep Bonde said...

I bought a day before breakout

Pradeep Bonde said...

I keep the trade open till it breaks out with tight stop.

Pradeep Bonde said...

c/minl252>=1.8 and minv3.1>=100000 stock is up 80% or more from its 52 week low and last 3 days volume is above 100000

avgc7/avgc65>1.05 (moving average 7 days/moving average 65 days is greater than 5%) and minv3.1>100000 last 3 days volume is above 100000

c/avgc126>1.19 ( stocks is 19% above its 126 days moving average) and minv3.1>100000 last 3 days volume is above 100000

fooly183 said...

Pradeep,
can you explain more in detail why this day/time excactly was good for entering before breakout?

Pradeep Bonde said...

Because it was ready to breakout and was forming tight consolidation. The volume was low on that day offering very low risk entry. The idea of anticipation setup is to "anticipate" a breakout and enter before actual breakout day to make money. If one enters on b/o day one misses out on b/o day gains.
I have studied thousands of anticipation setups and study them every week and base my entries based on similar previous patterns.

LuckyHaa said...

pradeep,

How you manage stop loss ? Every day you place stop order or it keep in the broker terminal ?After purchase stock not moving as expected then what you will do ? Especially if stock fundamental is strong and stop loss not violated ?
I appreciate your response
Thanks

Pradeep Bonde said...

I put stop at low of entry day. After that I move my stop once I have 8% plus profit. If a position does not go up 3 days after I buy I close it.Getting stopped out does not bother me , it is part of trading. Some setup work some do not . Net net as long as I am profitable I am good. As of now 55% of trades worked. And average R/R is 2.45 to 1. Means for 1 dollar risked 2.45 dollar profit.