How to find stock likely to breakout

Stocks in momentum phase offer good anticipation points when they pause during their up moves. For motivated swing traders this offers an opportunity to identify such stocks and put alerts on them and enter on breakout.

WWAV was one of the highlighted stock yesterday and it had a breakout during the day. If you were watching it  or set alert it offered good swing trading opportunity.

Today I have around 20 stocks in anticipation list. Out of this around 3 I am keenly watching for entries.


Above stocks have orderly pullbacks or consolidation and also most importantly they are in momentum phase so a breakout will be continuation move.

Anticipating a breakout gives you an early entry into a breakout. As my account size keeps on increasing I am now spending more and more energy on trying to anticipate breakouts and entering very close to breakout level.

In order to generate this list I use a simple 15 minute process flow. The starting point is couple of scans I run in Telechart .


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


  • US Common stocks
  • avgc7/avgc65>1.05 and minv3.1>100000
  • Price % change Today between 1 to -1%
After running these two scan I merge them together as some stocks will be common.Then I go through the list to find setups that are setting up for possible b/o


  • 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
Once a list is generated I reduce it to 3 to 5 candidates to focus on. For them I pre calculate price at which I want to enter the stocks. Then I create orders at those levels if there is capital in account for new position. Or else I create an alert.
If you want to make serious money swing trading following a simple process like this will find you daily opportunities. 


Anticipation setups for May 27, 2015


These 5 stocks are on my anticipation list currently. While I am looking at them as bullish anticipation setups , they can also break down. 


Finding the strongest and weakest stocks

Strength in a stock is timeframe defined. A strong stock for a given time frame shows momentum. Swing traders focus on stocks with momentum or stocks likely to soon have momentum.

For a day trader a stock that is up or down  for the day and continues to go up or down is a strong stock. A stock which starts its move at one end and end near high for the day is strong stock. Within that move if it makes big % gain of say 10 to 20% for the day it is good strong candidate for day traders.

For swing traders a stock that shows 3 to 10 days strength is good candidate as it allows them to capture part of the move. A stock that goes up 25% in a month is good swing candidate provided one can identify such stock say in first one third of the move or in other word if we can figure out a stock up 8% in a week is likely to go up 25% in next 3 weeks.

For longer term trading involving hold periods of months to years strength might be defined differently. A strong stock on that timeframe is one that continues to go up without much retracement . Strength on longer term moves has two components one part has to do with momentum or rate of change. While another part of good longer term move is resiliency. Resilient stock sustain there move for extended period of time.

SWKS is an example of one such strong and resilient stock.

It is one of the handful of stocks that has been going up for over 2 years with very little retracement. Stocks like these are good candidates for longer term trading . Identifying such stocks can help you pyramid in to them. They exhibit certain characteristics during their up move and if you know what those are you can try and identify and scan for such stocks. 

WLT is an example of very weak stock. It has been in downtrend for 4 years. From a high above 100 it has been cut down to few cents now. And during this move it has had sustained downtrend .

If you want to find stocks for position trading look for stocks like SWKS or WLT. If you can regularly find stocks like this or scan for them you will have an edge on longer time frame.


How do stock move on 3 to 5 day time frame

Stocks move in momentum bursts of 3 to 5 days .

In 3 to 5 days they can go up 8 to 40%

Lower priced stock make bigger moves

Lower capitalisation stocks tend to make bigger moves

Low float stocks tend to make bigger moves

High short interest stocks tend to make bigger moves

What tells you a momentum burst is starting

A range expansion signals start of momentum burst

Range expansion in simple terms is a day that is bigger than previous 3 to 5 days move.

A range expansion preceded by non momentum burst (where stocks was not up 8 to 40% in last 2 to 3 days prior to it) is good candidate.

How can one find these kind of days

By using any kind of range expansion scan.

4% breakout is one of the ways to find range expansion.

Dollar breakout is another way to find range expansion on higher priced stocks that move in 5 to 50 dollar move but may not have 4% b/o on first day of momentum burst.

4% breakout scan which I use is a momentum burst scan

c/c1>=1.04 and v>v1 and v>=100000
Gives you stock up 4% plus
that also has volume surge compared to volume a day ago.
and has volume above 100000
The scan throws a wide net . Just because stock is in 4% b/o it is not automatic buy.
Once a candidate shows up you need to study the context of the setup and only select setup which indicate start of a momentum burst.

What to look for in a good momentum burst candidate

Based on our understanding stocks move in momentum burst of 3 to 5 days
one has to create certain guidelines for selecting candidate from 4% b/o or $ scan
First condition I look for is stocks should not be up 3 days in a row
Because if stock is up 3 days in a row it has already started its momentum burst and entering it now is not a low risk entry.
Second thing I look for is stock should have narrow range day or negative day prior to breakout day
Because that tells you stock was not in range expansion mode prior to breakout
Next thing I look for is relative smoothness of prior move.
This is personal preference based on my study pf stocks that make longer term up moves. they tend to trade smoothly , have orderly pullbacks or consolidation and do not have too many shakeout moves. the prior b/o on them have worked
Because given a choice I like stock that behaves in orderly manner. That reduces risk and marginally improves probability of success
Next I look for is young trend. A trend that is only beginning and is not severely extended . As far as possible first and second breakouts once a trend gets established are better. As trend gets extended probability of breakout failure increases.
Why this condition
Again to marginally improve the success rate.
These are some guidelines . If you use them 95% or more of 4% b/o gets eliminated.

Example of candidate I bought yesterday using the 4% breakout scan and above guidelines is FLY.


Anticipation Setups for June 19, 2015.

Bullish Anticipation Setups

Bearish Anticipation Setups


Anticipation Setups for May 15, 2015

Market had a big bounce back from bottom of the range. Many such bounces have been 2 day wonders. Let us see if we get more and convincing follow through.

Many stocks have held up well during this sideways range and they are near buy point. Little bit of buying can trigger breakouts in them.

Anticipation Setups

Bullish Anticipation


Bearish Anticipation



Anticipation Setups for May 14, 2015

Market continues to trade in tight range. However it is dual natured with many stock breaking down while some holding well and some making 3 to 5 days moves.

Some Chinese stocks are acting well. Not many good momentum burst trades currently. CMCM was good one recently.

Bullish Anticipation Setups











Bearish Anticipation Setups













Anticipation Watchlist for May 12, 2015

As market continues to be range bound , some stocks are setting up for up move and some for down move.

On bullish side as a swing trader I look for short term setups likely to work immediately, but you can use similar approach to find longer term trades also.

Anticipation allows you to pre plan your trade and in many cases give you great entry and instant reward.

Bullish Anticipation Setups:


Bearish Anticipation Setup


On a longer term setups SWKS, ABC , ULTA, AVGO, ACT ,  AAPL are some of the things I am watching.


Anticipation Setups for May 11, 2015

When looking for anticipation setups I look for a temporary momentum pause. A breakout from that level resumes momentum.

SWHC and ADPT are two such possible candidates showing up in scans today.


Think outside the box

There are many routine ideas in trading used by traders like support and resistance, breakouts, breakdowns, ranking stocks by momentum , mean reversion and so on. Most of them are in public domain. 

If you can go beyond those ideas and think outside the box then new methods and new setups emerge. Sometime great setup ideas emerge that way.

Couple of weeks ago a member on Stockbee site shared a unique way to trade momentum. He perfected the method over last 3 years and made triple digit returns using it. The entire idea is thinking outside the box and coming out with unique way to find the best momentum stocks. 

 I have over the years seen several examples of people thinking outside the box and coming with trading setups that make you wonder why did I not think of it before.

Thinking outside of box requires building the habit of doing it regularly that will keep your mental pantry stuffed with interesting and profitable ideas. You also need to be surrounded by people who encourage that.

Most of the time it involves taking a concept and playing around with , going in to depth , playing what if I do it this way, doing 100 variations of same ideas and so on.

If your trading is stuck think outside the box. 


The daily exercise to improve market understanding

All profitable trading methods are derived from a understanding of how markets  work on a specific timeframe. If our understanding is correct we can devise ways to scan and trade those opportunities.

I like to focus on a 8 to 20% moves in markets. These moves are short term momentum bursts.

Everyday I study stocks that made 8% plus or 5 dollar plus moves in last 5 days. I want to learn from that and incorporate those learnings in my trading.

These moves have certain rhythm and characteristics. When you study them over years you pick up some nuances. When you do it over and over again you start finding small nuances to look for in successful breakouts or breakdown and how to manage those trades. As market evolves some small things change , by daily studying these kind of moves you are on top of that. 

The process also help to embed in your brain a short term momentum burst move.

Sometime while going through them you start questioning some of your own guidelines for selecting trades or you start questioning commonly touted market rules.

One of the best reason for doing this is it is based on actual past winners in immediate time frame. It gives you lot of information on what is working currently.

Most days it takes only 10 to 15 minutes to do this. Some days while going through them you find something and then it can trigger a deeper study.

A 8% plus or 5 dollar plus move in a short 5 day time period is a explosive move and it is the kind of move everyday we are trying to exploit. Thousands of moves like this if traded with proper risk control and tight stops can make our year.

There are many traders who are obsessed by the index moves and you will see everyday they spend considerable time analyzing them using chart patterns or pivots or support and resistance.

But as a swing trader my primary focus is on finding individual stocks with explosive short term moves. Index is just a backdrop. Properly selected individual stocks help you beat the index many fold. The indexes have been up 5 to 6% at best this year, but we are already up several multiples of that with miniscule risk using such explosive moves.

The process of going through these past immediate winners helps us incrementally improve our trading as we gain better insight.

One of the presenter in the Stockbee advance bootcamp studied the big explosive moves and discovered that stocks that go up a lot in 5 to 30 days show some patterns in first 3 bars on 5 minute or 30 minute charts. If those patterns are present it dramatically improves the probability of stock following through. Now that is a very valuable insight to improve our success rates with swing trades.

As a swing trader we want to focus on explosive short term moves of 8 to 40% in 5 days or 5 to 25 dollars in 5 days.

That particular move we call momentum burst has certain unique dynamics to it and based on study of thousands of such past moves we have derived our trading scans and guidelines for entry, exit, risk, stops and setup selection.

If you want to trade breakout or anticipation setups , you should be your own expert on it. A book , or a blog , or a twit is not going to help you much unless you start getting in to depth of that move. And it is easy to do this once you set up time for this on daily basis.

You need to have very good understanding of 5 day timeframe. Same way if you want to be position trader you need to be expert on one year timeframe..

This kind of approach is very narrowly focused on a very specific phenomenon in market. It helps you to focus on most explosive part of a trend move.

In order to master a setup or an idea you need to be at it day in and day out. If you do it for few months , you see things others may not see , or gain insight others may not have. If you do this for six month on your own you will gain more insight in to markets and more importantly find very profitable setup and you will own it up as it is based on your own unique understanding of it.

Study these 8% moves closely to see how the move happens.

What was the setup before the start of the move

What was the 5 day action before start of this move

Was the stock up or down before start of the move

Was it near 52 week high or low

what kind of Trend Intensity it had

what triggered the move

what kind of breakout

How much was it up on first day of breakout

what kind of volume on breakout and pre breakout and post breakout

how did the move progress

what was the magnitude of move in first 3 days

and so on...

A daily effort like this cumulatively builds your understanding of the setup you trade.

Because if you want to find 8 to 20% moves in 3 to 5 days, you must know thousands of such moves. So that when a similar setup shows up you can instinctively and instantly react to it.

There are many variations of the 3 to 5 day momentum bursts you will find if you do this for months.

Some are high tight flags, some are double bottoms near top of the range, some are bottoming setups from 52 week low, some are part of range bound action. But most share some common characters.

Moves of 8 to 20% start from some kind of pullback or sideways moves.

They most often start with narrow range days.

They are not up 3 days in a row before start of the move.

Most have low volatility phase prior to breakout.

On the first day of start of their 8% plus move they have significant range expansion.

Most moves only last 3 to 5 days before having pullback.

If you know this you can anticipate some moves.

You can figure out where to enter, where to exit, where to put initial stop, where to move stops and so on.

The best part of doing it is , you will build your own knowledge and base your trading based on your own observation and your own derived rules based on what "actually" happens in a the market.
In order to do this I run 2 scan one bullish and bearish.

Bullish 8% plus or 5 dollar plus in 5 days

c/c5>=1.08 or c-c5>5 and minv3.1>100000 and c>=5

Bearish 8% plus or 5 dollars plus in 5 days

c/c5<.92 or c5-c>5 and minv3.1>100000 and c>=5

After running the scan everyday I study these moves. The first thing in the morning I review these candidates. Write down my observations, capture images of some of them, put notes on those setups and so on.

You can use the above pcf in Telechart as Custom PCF% True indicator. That will show you periods where this condition was true for that stock. That way you can study thousands of these past moves.

You can also use the Custom date sort feature in telechart to find 8% plus movers for any specific time frame in the past ( for example you want to find say 8% bullish moves during market correction)

For longer term moves study I stocks up 80% plus in a year.

studying these kind of moves can offer you unique perspective that can help you build your own methods. Last night a trader shared his study of longer duration moves and how he used it to recover from his big losses and make big money. He found unique characters of those moves and built a method to scan and trade them. 

This kind of effort is only for those who are serious about making money. 


It is a chop fest

It has been choppy range from February onward. The market has essentially gone sideways. Every time it tries to breakout sellers show up. Everytime it tries to breakdown byers step in.

Choppy markets like these require patience as ultimately it will break big in either direction. This kind of market can be tough for breakout traders.  This requires very short term focus. However some sectors have broken down and setting up for shorts. 


How to find Bullish Anticipation setup

I have been publishing list of anticipation candidates for last couple of months. What I post is same list you can generate yourself once you know how to do  it step by step.

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 for best results.

Finding "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

Double Trouble Scan using Telechart

US common stocks

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

Price % change Today between 1 to -1%
Trend Intensity TI65 scan using telechart

US Common stocks

avgc7/avgc65>1.05 and minv3.1>100000

Price % change Today between 1 to -1%

After running these two 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

Once you have list of anticipation setups narrow them down to 1 to 5 for next day action.Quality is more important than quantity.

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 candidates for May 4, 2015

Sometime stocks breakout on high volume and then go sideways or pullback. Once the big move is digested the stocks can resume the trend.

NFLX and AMZN are two recent examples of this. In both these cases stock gapped up big on earnings. After that NFLX  has gone sideways in a very narrow range. It can breakout to either side.

AMZN has pulled back and now a good candidate for a bounce trade. Better entry on it was yesterday.


Breadth puts probabilities in your favor

As a trader we deal in probabilities. Market breadth is very good at signalling probable correction zones ahead of time. That way you can reduce risk aggressively or position for a turn.

The Stockbee Market Monitor is one of the ways to use breadth to time markets. There are many ways in which you can do it once you understand the concept of market breadth.

One of the best and probably only book on market breadth is The Complete Guide to Market Breadth Indicators: How to Analyze and Evaluate market Direction and Strength (Hardcover) by Gregory L. Morris. It is the most comprehensive collection of breadth indicators and studies.

Breadth indicators can help you avoid big drawdowns and are objective ways to find market strength and weakness.

As you can see as soon as Market Breadth became extremely positive, the market entered a correction phase. Extremely positive breadth tends to result in selling in short time frames.