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Stocks move in short term Momentum Bursts

Posted on 12/31/2013


16% returns in three day on WUBA trade



WUBA is a recent example of kind of swing trade I look for. It is based on the principle of momentum bursts.

Stocks move in momentum bursts of 3 to 5 days. During this 3 to 5 days period stock would go up 8 to 20% ( lower priced stock can even have bursts of up to 40%). Higher priced stocks above 40 tend to move in momentum bursts of 5 to 25 dollars.

Such bursts may or may not have clear identifiable catalyst. You need to know nothing about the company to trade this kind of burst. This is a pattern and probability based trade.

All such momentum bursts start with a range expansion. The first day of the move is range expansion day. Often there is also volume expansion along with range expansion.

The price moves in the direction of range expansion. When there is range expansion it attracts breakout traders, it attracts other momentum players, day traders, quants and so on. That results in continuation of move for few days.

Range expansion basically means a day which is up bigger than last 5 to 10 days bars. A range expansion preceded by series of range contraction days is good candidate in this setup. Moves preceded by orderly range contraction can be explosive.

A successful momentum burst will lead to immediate follow through. Say a stock breaks out in the morning, it will continue to go up through the day and will have immediate follow through in next 2 to 3 days. And the follow through should also be of big 4 to 5% plus magnitude on second or third day.

In most cases the momentum dies down in 3 to 5 days. If you keep holding after the 3 to 5 days period, you would often see the stock ends up giving up all the burst gains and may not have another momentum burst for several weeks or months. Sometime the burst gains vanish intraday itself.

Depending on price of the stock such momentum bursts can be of 8 to 40% magnitude. Lower price stocks tend to make bigger moves. For a stock trading below 5 dollars a breakout day move itself might be of 10 to 20% magnitude. For traders with small accounts that offers good opportunity. 

As a practical matter if you have large amount of capital to trade with it is difficult to grow your account by just focusing on these low priced stocks. You might have to buy lots of 50000 to 100000 shares for meaningful difference to your account.

Lower float stocks make bigger moves. Low float and high demand creates explosive moves. If you see in any year the most short term explosive moves will be on extremely low float stocks. For those with smaller account size there is distinct edge in trading low float stocks.

No specific catalyst is needed for these momentum bursts. Why do these moves happen. ?In some case there might be a specific news catalyst on day of first range expansion day , but in vast majority of these kind of momentum moves, there is no clearly identifiable catalyst. However tracking news on daily basis might help you enter some of these momentum bursts very early and magnify your profit.

During bull moves in overall market such momentum bursts have been observed for over 100 years. This is structural nature of market. Stocks seldom run up or down smoothly. A 30% move in stock over 3 months in a stock might be completed in 2 momentum bursts of 10 to 15% in just 5 to 6 days. Rest of the time te stock might retract or go in range. In a year you will probably find 5000 to 10000 such 3 to 5 day setups when both bullish and bearish setups are combined.

Momentum burst kind of swing trading allows you to grow your account with very low risk. For a mere 3 to 5 day exposure to market you capture the most explosive part of the move and you are not seating in dead periods holding stock waiting or anticipating a breakout which may or may not come.

Trading this kind of setup requires extremely good ability to ruthlessly cut losses if a trade does not work immediately . It also requires skill to exit when things are still in explosive phase and not wait for reversal.

Per trade profit on these kind of trades will be on an average just 5 to 10% as you are only going to get part of the 8 to 20% move. By the time you enter on breakout day the stock might be up 4 to 10% , so you will not be able to capture that part of the range expansion move.

To trade this kind of setup you need to be willing to do 200 to 1000 or more trades in a year. You make money by compounding these small gains. So this is high frequency and low per trade profitability method. But for a skilled trader this can lead to explosive returns. 

This is fairly simple strategy to master and can make you millions.

Methods and philosophy

How to develop an enduring edge

Posted on 12/30/2013



If you want to be profitable trader you need to have a specific expertise on a setup or a bunch of setups. Expertise in skill like trading is developed through procedural memory development.
To become consistent trader you need to understand key concepts of setups, expertise and procedural memory.


Setup is a set of conditions used to find, enter and exit a trade. For example Momentum Burst is a setup with specific characteristics. It has specific criteria for entry, exit, risk, stops, profit target, and duration of trade. It is a structural setup in the sense this particular pattern repeats on stock after stock thousands of time in any given year.


Similarly Stockbee Trend Intensity Breakouts (STIB), Episodic Pivots, Double Trouble, Stockbee Lemonade Strategy for 401 k are examples of specific setups.


A setup encompasses a whole process of trading a specific trading method. If you know a traders setup you should be able to replicate his or her trade on your own. On this site the constant focus is on setups and procedural memory development.


Why is setup selection so important


If the setup you select is not based on structure of the market or is not based on observable phenomena it is extremely difficult to develop expertise on it. Setup selection allows you to narrow your focus down a specific and very narrowly focused process to be mastered. It allows you to concentrate your energy.


With proliferation of social media sites like Twitter, Facebook, Stocktwits and blogs there is constant sharing of trades. A trade is of no importance if you do not know the setup logic, scan and steps behind it. If you know the setup you know a replicable way to find that kind of trade on your own and also to trade it.


Many trading blogs or newsletter sites do not share their setups but only share their stock picks or scan results. Many traders believe if you share a setup idea and lot of people start trading it, it deteriorates. So they guard their secret sauce very tightly. Then they often claim setup is not important , but psychology is.


Once you understand the concept of setup and comprehend it you will look for setups rather than individual trades and tips. Individual trade or a stock tip might make you one time money but mastering a setup can make you money for 25 years or more.


Learning one good setup can make you thousands or millions of dollar. In order to master a setup you need to be willing to spend significant amount of effort one time till you can trade the setup consistently.


Setup selection is very important for new traders and those just starting out. In the beginning if you do not focus on setup, you will most likely blowup your account or have significant losses and never ever recover from them. Many new traders will end up giving up trading before they even find a good setup.


If you are just starting out in trading ,your task should be to hunt for a setup. Hunt for a setup used successfully by other traders. Understand it in depth. Break it down in terms of logic and process flow and then recreate it. Try it out for few months and then make changes to suit your personality. It will shorten your learning curve if you can work on existing setup than trying to find your own setup.


In the beginning of your trading career , if you are lucky enough to find a good setup it will save you 2 to 3 years of effort and frustration.


For a more experienced and successful trader, learning about new setups help you expand your repertoire of trading setups. It is easier for you to quickly learn new setup if you already trade other good setup. All successful traders trade a setup or a bunch of setups. They have skill specific to their setup. Successful traders have developed cumulative expertise on trading a very niche setup or basket of setups.


So if you are a trader looking to progress your trading further think setups and not individual trades.


Once you have a setup your problem of cognitive load will decrease because you will be doing a very narrowly focused task. Once you find your own setup you will be able to shut out environmental noise.


What is involved in developing expertise


Any expertise is task specific. So defining a specific task to become an expert at is very critical. The first step in becoming a good trader is to arrive at a tradable setup. And then become an expert in trading that particular setup. It is a very microscopic skill.
What is involved in developing expertise.


If certain task or skill is important to us we develop expertise in that specific task or skill area. These tasks can be as simple as driving a car, or cooking Italian food, or managing people, or more evolved like  developing java apps, or performing brain brain surgery, or trading the markets. As adults we develop expertise in specific tasks related to our work, our hobbies, our interests, or human relationship.


Developing expertise  allows you to earn money and have fulfilling life. Psychologists have studied this area extensively. Psychologists use the term expert to refer to an individual who is significantly more experienced than others in performing a particular task. A group of adults can have varying expertise on same task.


Expertise once developed allows you to do a task in less time and do it better. Expertise is developed through encapsulation. Encapsulation is a process whereby the adult learner’s cognitive energies and skills becomes focused on specific areas.  Once an expertise is developed the expert does the task differently from a novice.


Novices rely on formal rules and procedures to guide them in doing a task. Experts on the other hand rely on accumulated experience. You will see this in trading.


Lot of time you will see novice trader trying to do trading in step by step manner, while an experienced trader will take and exit the trade differently because he processes information based on accumulated experience. You will see expert traders develop intuition about coming moves or danger and act quickly while novices get stuck.


Novices are also conscious of the task performance process. They are trying to do task by referring to manual or trying to remember steps. This creates distraction and creates load on cognitive process.


As expertise grows the performance of task becomes automatic. This cognitive phenomenon is called automaticity. It is developed through procedural memory. You will see this in trading. Novice traders are flustered by steps involved in trading , they fumble to find right stops or scans, or exit a trade, while expert do the same task effortlessly without much thinking or being aware of what they are doing.


As expertise is acquired the learners cognitive processes become more efficient and they can process more information quickly. They can see the whole picture. They can learn similar task quickly.


Once you develop expertise you also develop situational awareness. Studies who experts are more aware of the specific circumstances in which they are working. They can quickly change direction. You will see this in good trader. They can quickly adapt to changes in market environment. They are more aware than novice traders about the situation.


Studies of experts also show that they have highly developed self monitoring skills. They do not suffer from motivational high and low like amateurs do. They can quickly bounce back from setbacks. They have high self efficacy beliefs specific to their area of expertise.


Studies of experts show that they have larger number of strategies to do same task and they can do it more efficiently. Experts know how to get out of trouble because they have multiple strategies to deal with unexpected situations. Anyone who has traded for long period of time knows how important this skill is.


Expert traders are more flexible than novices. They rely on intuition in ways that novice find difficult to comprehend.


Let us take a task of say driving a car. Did you learn it in one day? Can you learn it by trying it for a week. Can you do it by reading a manual about it.  Same way if you want to be good at trading you need to be willing to put in effort to master the task and develop expertise.


Only 5% of traders have that kind of time and attitude. Majority are just flirting from one thing to another and are just trying out bunch of things. That is why you will see high failure rate in trading.


Methods and philosophy



Stick to an approach

Posted on 12/27/2013

Stick to an approach

If you have a valid setup idea and then if you stick to it for long period of time it works.

Sticking with a setup idea for long period allows you to master it and fine tune things.

Sticking with an approach does not mean sticking to exact parameters of a scan or trading mix but it means broadly keeping your logic behind the trade constant.

If your approach is breakout based, if you stick with it, over months , trades, years you gain valuable insight in to the setup and you will become good at it or will know when to be aggressive and when to be cautious with your setup.

One of the constant temptation in trading is to completely abandon an approach and jump at every new idea you hear about or read about in book or on some site. The grass is always greener on other side. People who constantly do it gather no enduring edge.

One of the other thing wonderful about the market is that most of the approaches that work are in public domain and have been around for hundreds of years.

Breakouts based trading has been around since markets started.

Pullback based trading has been around since markets started.

Growth investing has been around since market started.

Value investing has been around since market started.

Contrarian investing has been around for hundreds of years.

Trend following has been around for years.

For a short term traders the two most common approaches are breakouts and pullbacks. Traders have developed variations of these two approaches. Those variations involve small nuances. But the basic setup remains intact. 95% breakout +5% nuance or 95% pullback with 5% nuance is the most common approach.


Most people do not have patience to stay with an approach. They give up at first hint of trouble or when things don't work for a period of time they abandon the complete approach.

As a trader you have to be willing to persist with an approach, many trades may not work, in a year there will be months when you will feel miserable but if you follow a setup by end of the year you might be more than compensate for that period.

Stick with an approach for sufficient number of trades or months.

One of the benefit of methods traded here is that you will have very little draw downs if you follow my approach. If you see over years the approach has been to take as little risk as possible and yet compound the money.

Drawdowns can drain your energy and put you offtrack. Low drawdown methods allow you to stick with method and gain confidence.

As the year winds down...

Posted on 12/24/2013
Santa Clause rally is in full swing with a large number of stocks leading the advance. The strength should continue in the year end.

The year has been largely dominated by don't fight the Fed theme. Every time there was even a minor correction in the market the Fed aggressively intervened either through policy or verbal intervention. That put a floor under the market and made life difficult for the short sellers.

As the year comes to end it is time to reflect on what really matters in the market. While Fed is important, at individual trader level it does not matter. What matters most is having a setup and well though out method and shutting out the macro noise like Fed and most of the BS that is written about the economy.

What you make money out of is a setup idea with ability to give you positive return over large number of trades. If setup works you make money. There are many possible setups a trader can trade. The most important thing is is your setup profitable.

Let us look at two setups ideas I traded this year: one was based on earnings breakout and the other is a breakout setup. The earnings breakout setup looks for stocks with neglect that had surprisingly good earnings and buys on day of earnings. This is a setup I have extensively described on this site and has been trading for over 13 years. The breakout based setup is primarily a swing trading setup that looks for momentum bursts of 3 to 5 days and 8 to 20% magnitude. The average holding period in this setup is 3 days.

Working People Setup


The earnings related setup has in hypothetical 100k account has 8.45:1 ratio of profitability. Or in simpler term average profitable trade has been $3417 and losing trade has been $404. Largest loss on any trade was 600 dollar and the largest profit was 24500 dollar. 73% of the trades were profitable. Only 17 trades were taken under this setup in the year. This is a very infrequently traded setup and has currently has open trade in FB from a price of around 33.4 and XIV from around 24.5 price, so final profitability ratio  might be much higher than 8.45:1.

The setup by year end given current prices on open positions would give returns upwards of 40% with extremely conservative position sizing. Those who risked higher per trade  have much higher returns for the same number of trades. If you risked say 25% of account on each trade you would have doubled your money using this setup. This setup is primarily focused on Working People who do not have time to do active trading. Most positions are held for months or weeks.

This is a setup idea which does not depend on Fed action or any other macro variables. Every year you will find stocks with months or years of neglect that will suddenly surprise the market and go on to make big move. If you understand the setup and develop process flow for trading this you can find a profitable method that you can exploit for years. If you are serious about making money in 2014 and beyond then a setup like this can offer you life long profitable opportunities.

The swing trading related setup based on momentum bursts is a frequently traded setup and produces hundreds of trades in a year. By its very nature it is a short term setup so its profitability per trade or profitability ratio reflects that.

Active Traders Setup


The ratio of Average Winner to /Average Loser in the setup was 2.26:1 for the year as of today no counting open trades. In dollar terms average winning trade produced profit of 818 dollars while losing trade produced loss of 362 dollars. Win/loss ratio was 50% (50% of trades were profitable). This kind of setup requires taking hundreds of trades. More trades you take in this kind of setups the better it is as that increases profitability through compounding. A setup like this can produce 500 to 1000 trades or more in a year.

None of these setups or many other setups used by profitable traders are complicated. They produce profit over sample of trades , in this kind of trading approach individual trade does not matter as long as you keep following your setup. Profit happens because the setup works.

If you are new to trading or struggling, the most important thing that will make you profitable is to shut off all noise like CNBC, Stocktwits, Twitter , Yahoo Finance message board, or newsletters and so on and just focus on mastering one or two setups. If you focus on setups you will have profitable 2014 , but more than that you will have many profitable years. Setups once mastered become your tool to extract money from the market for rest of your life.

If you are serious about making money then don't look for stocks picks and hot tips but look for profitable setup ideas. There are thousands of newsletters, gurus, blogs , and sites offering you hot stock tips, but what you need is a setup and not tips. Because once you learn setups you can generate your own hot picks.

Most important thing in trading is setup selection. ....

Have a Merry Christmas.....


Santa Clause rally is here

Posted on 12/19/2013
After spending few weeks post Thanksgiving going sideways the indexes had big bounce after the Fed meeting. This bullish move will likely continue in to new year. You should not have shortage of swing trading candidates with this bullish action.

Rotational kind of action continues and money was rotating in to new sectors like financials and home builders. IPO 's continue to do well.

All in all good year end action so far.

Last full week of trading in 2013

Posted on 12/16/2013
and that should produce some fireworks. As we come to the end of 2013, the market has had very good year. outperforming the market this year was not much of a problem as Fed support at every dip in the market produced big rally.

As of now we have seen widespread correction in momentum stocks but the indexes are just 2 to 3% from high. plus many stocks are forming constructive continuation patterns. That sets us up for possible year end rally.

On every dip betting on bullish side has been the winning strategy so far. That might still work in last 15 days of the year. 

A chop fest

Posted on 12/11/2013
Market has again settled down in choppy range. Selling in momentum names continues and most stocks are now below their 40 day moving average.

The Worden T2108 indicator is at 44.18 indicating only 44% stocks are trading above their 40 day moving average. Due to persistent Fed support breadth divergence has not mattered much in this market. Deterioration in breadth has been followed by aggressive dip buying . Many of these V shaped recoveries have only made marginal high.

For swing traders the action is good. Pockets of strength continues and breakouts on recent IPO's like TWTR, VNCE, ZU, QUNR continue to work. As the year winds down the chop fest might result in another rally attempt with marginal new high. 

Job report bounce needs follow through

Posted on 12/09/2013
Market had a big bounce on Friday . Before that it was in a pullback mode. A mild pullback mode is the apt term for that action.

Rotation continues to be the theme of the market. Many momentum leaders continue to witness correction. However new sectors and stocks continue to breakout.

The Stockbee50 lists give you a good handle on this shifting dynamics in leadership. If you look at the leaders on 21 and 65 days momentum list you will see the stocks where money is rotating in to.

This continues to be good market for swing traders focusing on momentum bursts. 

:Pullback continues

Posted on 12/05/2013
The post holiday pullback continues. Yesterday was volatile action day with several intraday rallies and fades.

However individual setups continue to show up. There were lot of good breakouts yesterday and there was no shortage of swing candidates.

LVS had a nice high volume breakout after going sideways for a month. A follow through could make this 8 to 20% trade.


FSLR, AN, TWTR, FB and another 20 odd stocks had good high volume breakouts and intraday follow through. 

It is a selective market but there are opportunities a galore for swing traders. 

Profit taking leads to pullback

Posted on 12/04/2013
Post thanksgiving the market has been in pullback mode. Most momentum leaders continue to reverse or pullback. Breadth has been deteriorating again after a brief attempt at recovery.

The market had decent run post resolution of debt ceiling fight. But now is losing the momentum. The sentiment indicators are again at extremely bullish levels.


http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx

Extremely bullish readings do not immediately result in turn but there i often a delayed reaction. The excessive bullish readings are not translating in to blow off kind moves.  If you look at the Stockbee Market Monitor readings of 50% plus month, you will see them at a range of 7 to 17, which are not at all high. Readings above 20 indicate excessive bullishness on those columns. We have not seen those kinds of readings for months.

Which makes this a small moves rotational market. Breakouts are happening but post breakout moves may not be of big magnitude.

One good breakout candidate from yesterday's breakout scans is CWEI. It is a thinly traded stock. Float is just around 6 million. Last couple of breakouts have been successful with 20% plus moves post breakouts. Volume was high on breakout. It has a potential for 20% move if breakout works.


Grinding higher

Posted on 11/26/2013
It is a slow grind higher with selective action. It is not a broad based up move. Rotation out of momentum leaders is a daily theme. QIHU was example of that yesterday.

But the selling is well contained and rotation in to new names is leading to slow  grinding higher move. Follow through on breakouts is not significant in most cases, so smaller profit targets are working. Biotech sector is clearly the leader at this stage.

Some of the good breakouts from yesterday are: BLMN PTIE IMUC






Good setups are showing up

Posted on 11/25/2013
The market has recovered from a brief pullback and is on way to establish new high.

The momentum stock continue to suffer setbacks and reversals. LL being the latest example of that.

However this is rotational market and new stocks are emerging to take on leadership role. Number of breakouts from stocks that were range bound or consolidating for few months is where money is flowing in to.

Some of the good breakouts are CHTR, PCP, WETF, and GST.






Two large momentum leaders that are setting up for possible breakouts are GOOG and NFLX .



Under the hood

Posted on 11/21/2013
The indexes are hiding the correction in momo leaders. If you just look at the indexes you will feel like market is having a just mild pullback. But the stocks that were up most in last one year or six month do not show that good a picture.

If you go and look at the Stockbee 50 data from few months you will see most top ranked stocks have reversed and some are down 30% plus in few weeks. This clearly shows rotation out of high relative strength stocks.

That is how momentum works. Stocks go up for long period of time with mild  and orderly corrections. At some sage late stage and euphoric buyers start bidding up shares to unsustainable levels. People start believing all kinds of rosy scenarios. If you see the action in 3D sector, it shows classic case study in this effect. Any thing and everything in that sector was going vertical for few weeks and now reversed hard.

The other speculative sector getting hit hard is recent IPO's. Many of them doubled on day one and now are steadily giving up gains. This is one of the reason why one should not buy IPO's on first day in post market. But when speculative sentiments are extremely bullish this happens again and again. Companies and merchant bankers exploit the excessive bullishness to push out as many IPO's as possible.

While the momentum leaders are getting hit, it is a not a broad based selling. Number of stocks continue to hold up well and there are signs of sector rotation. If you look at expanded set of stocks with confirmed momentum on yearly or 65 days basis, you will see large number of them are holding up well and many are having series of narrow range days. That kind of action can be hint of further gains ahead for those stocks.

Sentiments continue to be at very bullish levels and that might act as a damper on further big gains till year end . A muddled choppy range looks likely scenario. Which is not bad for being selective in picking your setups.


One of the setups showing up in Stockbee Trend Intensity Breakout scan yesterday was CBOE. Stock has confirmed momentum on 65 days and one year time frame. Had high volume breakout from a multi week range. Stocks in the sector are rallying and confirm this sector move. 

One setup and one day at a time

Posted on 11/19/2013
The market continues to move higher. Yesterday there was a bit of fade after 2:30. The sudden reversal on many momentum stocks is in line with rotational market.

Most of the momentum leaders are fading after breakouts. Some are already in correction mode. Some are down 20% plus in few weeks. A narrower set of stocks are leading the advance.

In this environment you have to look at specific setups and keep profit objective in line with market conditions.

As of now breakout continue to work and also shorts are having follow through. No follow through on shorts was a theme for many months, that has clearly changed as number of stocks pullback.


GOOG: A swing setup

Posted on 11/14/2013



Google (GOOG) was something I was watching for few days for swing entry. It offered good low risk entry for 50 to 100 dollar potential swing.

GOOG is recent earnings breakout. After earnings it offered a 50 point trade. After that it pulled back and setup again. The trend intensity on GOOG is 111%. It is in confirmed uptrend and this is a classic swing setup.

Some other stocks setting up well like GOOG for possible breakout are:

PCP

UCBI

FNSR

NXST

UEPS

ALGN

CRR

ARWR

ZHNE

Chop chop chop

Posted on 11/13/2013
Every time the market has rebounded from corrections in last one year, it has had V shaped recovery.

It reverses and just keeps heading high for 2 to 3 weeks before running out of gas. But this time rebound is not leading to follow through. So we have settled in to choppiness.

The choppiness is leading to wide ranges being formed on number of momentum stocks. Wide ranges do not tend to lead to successful breakout. A orderly pullback is good, but when large number of stocks show choppiness it is not a good sign. Next market advance will if it happens will be lead by even narrower set of stocks.

Fading of strength and breakdowns near recent high continues to be the theme. For tactical short swing trades those offer some opportunities.

Signs of distribution are clearly spreading in more stocks , DFS, TRV, CB, ACE, and ICE shown below are good examples of that.






High volume selling near recent high is what I see on many stocks. They may not follow through immediately, but after few days, they will at least revisit their range lows.

At this stage I am defensively positioned. Couple of stocks like GOOG, AAPL, and PCP are in good pullback mode and I am watching them for possible long plays in year end rally.

Stocks likely to breakout soon

Posted on 11/12/2013
We will know today  if the market an continue its bounce. There has been widespread selling in momentum names but this market has shown tendency to quickly recover from such selling in last 18 months.

Not many stocks are setting up for breakout in momentum universe. After looking at over 500 stocks with confirmed momentum , I found these 4 as possible candidates to watch.


MKTX
ALGN
ZLC
SID

On the short side one possible good setup is JOY. The stock has lagged the market and sector is also lagging. 


A bounce but will it follow through

Posted on 11/11/2013
The few days of oversold reading on index resulted in a bounce on Friday. That has been the pattern in this market . V shaped recovering after few days of selling.

However underlying stock action in momentum stock does not show high probability of continuation. Most of the momentum leaders are in retreat or range bound. There are very few orderly pullbacks.

That means one need to look at the new leaders. Banks were clearly the new leaders yesterday with several of them having breakouts on Friday. If they follow through then they will offer swing opportunities. 

Wide spread deterioration

Posted on 11/08/2013
Market witnessed a big breadth deterioration yesterday. But it was not at all surprising if you were tracking breadth trends.

Breadth was deteriorating for last 2 weeks. There was continuous deterioration. If you have been tracking the Stockbee Market Monitor  you would have seen it clearly. We were positioned in cash for the drop in anticipation of this for sometime. And did some quick short trades for nice profit yesterday.


The T2108 Worden indicator that tracks number of stocks above 40 day moving average was also showing same thing. It reached a high of 80 few weeks ago, that kind of extremely bullish breadth tends to attract pullbacks and especially in extended bull  market attracts profit taking.


This market is like a cat with nine lives , it has repeatedly bounced back from such selling. So task is now once again cut out for dip buyers. If they fail to show up then we might have a 5 to 8% correction.

The sentiments have become extremely bullish with record number of advisers and money managers bullish with expectation of year end rally. Plus money flow in to fund is at record as retail pile on in to stock. That backdrop is not a good sign for the market in short term. Markets climbing wall of worry is better than a market which is wildly bullish.

Top 50 momentum stocks for swing traders

Posted on 11/06/2013
The market continues to show breadth deterioration, but no major breakdown in indexes. A sideways moves of few wees, might result in continuation setup.

Markets have shown tendency to bounce back vigorously from pullbacks but struggled to make new high. After making marginal high they have tended to pullback. So we have settled in to a zig zag up move.

Many stocks with momentum are reflecting the same pattern seen in indexes. That means you either buy a pullback or be selective on breakout setups. There are still some good breakouts setups.

ICON is a good example of that kind of breakout setup that has worked. Stock had a high volume breakout 6 days ago. It showed up in Range expansion scan. Since then stock has had a nice up move. But ICON kind setups have been few.


While there are many earnings related breakouts happening, many of them are just one day affair with no follow through.

The momentum stock universe continues to show good consolidation in many names and around 12 to 15 stocks are setting up very well for possible breakout.

Top 50 Momentum stocks

CSIQ
ACAD
ZHNE
RSOL
IDRA
CSUN
SPWR
JKS
TSL
VIPS
OXBT
GENT
HSOL
RVLT
GST
GALT
LCI
TSLA
KERX
MTG
EVC
IQNT
RAD
FOE
YGE
HIMX
NXST
GTN
BCRX
STP
SUNE
ZLTQ
ADUS
LIN
ROIAK
CLDX
NFLX
PLUG
SOL
CLVS
BEAT
EDMC
III
FDML
NOAH
ABFS
YELP
ANAC
AEGR
ARWR


As a swing trader momentum stocks offer you the best choice of fast movers in the market.