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How to find Bullish Anticipation setups

Posted on 4/20/2016

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%


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. 

Anticipation Setups for April 19, 2016

Posted on 4/19/2016

Anticipation Setups for April 19, 2016

BRKR and HDS are among the 8 stocks I am watching for possible breakout in next few days.
Anticipation Watchlist

Anticipation allows you to control risk and get into setups early or as they are breaking out. A
nticipating a breakout helps improve your per trade profits. It can also lower your risk as your stop is close. It can help you profit from even smaller moves.
Anticipation requires more pre planning and effort than buying a breakout. You need a process flow to do that. The process should be done daily and followed consistently.
If you are serious about making money swing trading learn how to develop your own momentum based list of stocks, and how to identify and anticipate good setups from that list. How to enter, exit and manage risk on the trade. If you put one time effort doing that you will have year after year profits. Go through my old posts on anticipation.

How to improve your trading

Posted on 4/14/2016
Start by understanding how markets and stocks work. If you want to operate or repair a car you need to know how it runs and rules of the road.

To build an edge in trading stocks you need understanding of market structure and how stocks move.

You will fail if you do not have structural understanding of the market . Once you develop understanding of markets then you will be able to design your own methods to extract profit out of the market.

A good understanding of markets will also help you when your methods stop working or you hit rough patch. You will know how to and what to fix.

Unfortunately many traders do not survive long enough to reach a stage where they can understand market structure. The focus on newsletters and recommendations prevents many from understanding market structures.

Most traders do not start out by an objective of understanding market structure. They start by looking for way to make money.

Some are lucky to find a method based on market structure early in their career.Some survive long enough and figure out market structure.

If you want to build enduring trading edge and make money first and foremost understand market structure.You must know how market operates and why it operates in that manner.If you can understand that then you can build many ways to benefit from that understanding.

To understand markets understand the role momentum plays in the market. It is the most basic structural tendency of the market. Momentum has been studied extensively and you can benefit from understanding it.

How to narrow your focus

Posted on 4/12/2016

If you want to make money in the market then you have to narrow your focus to a specific style and setup .

For a new trader or struggling trader this can be a big challenge. Because you may not know what to focus on. Every style and idea looks attractive at that stage. As you gain more experience it becomes easier to narrow your focus. 

For beginners the best route to narrow your focus is to copy some of the well known approaches that have worked. By basing your approach around a ready template you are likely to  reduce your learning curve significantly.

For experienced traders periodically re looking your approach can help narrow the focus. often as you gain experience you can end up trading many different setups as you get exposed to many successful traders and their approach. This can be good and also sometime bad. It can lead to style drift.

While there are many ways to narrow your focus the simplest approach is to first narrow your approach to specific types of stocks:

  • growth stocks
  • momentum stocks
  • value stocks
  • turnaround stock
  • high priced stocks
  • low priced stocks
  • highly liquid stock
  • low liquidity stocks
  • low float stocks
  • ETF
A narrowing decision then helps you further narrow your setup to specific pattern or anomaly on those stocks.

For example growth stocks tend to breakout on big earnings surprise . You can decide to build your approach around that and focus only on stocks with very big first or second earnings surprise. The Episodic Pivots approach I have detailed focuses on that.

 Successful speculation is difficult art but to develop it first step should be to narrow your focus. 

Do few things extremely well.

Posted on 4/11/2016

If you are serious about specializing

If you want to make money trading ,don't focus on too many setups . Do few things extremely well.
If you see most successful investors or traders they trade one time frame and one or 2 setups well.
If you talk to very successful traders they do few things well.
Some focus on day trading , some on swing trading , some on position trading Within that they specialize by a specific setup like pullback or breakout.
Successful traders stick to a style and setup for years. They might add nuances and change tactics a bit but their basic
Purposeful sacrifice is first step you need to do to narrow your focus to few things....
It involves taking a hard look at your style and only focusing on few things and abandoning some ideas.
The other key is not to get tempted by every new book or idea you come across and abandon your core approach.
Define your style and setup and then wait for it to show up.
Wait for your setup to show up instead of constantly changing your method
Define your setup in great detail.
Do all the thinking when you decide to trade a setup.
Convince yourself that you can make money using this setup logic.
Study thousands or ten thousand past examples before trading it. Get every detail about the setup etched in your mind.
Effort involved is significant in this but is one time. After that wait for the setup to show up and pounce.
As against that what you see day in and day out is traders flirting from things to things. This is especially a problem for new traders.
Brownian motion.
Someone says sector analysis is key everyone runs for them.
Someone says only buy beaten stocks and everyone runs to them.
Someone says buy mean reversion everyone runs in that direction.
Someone says rich get rich by buying beaten down stocks, everyone runs for it
Someone says pocket pivot again mad scramble to get scan for it.
Someone says John carter indicator, then everyone goes crazy for it.
In the process you are just flirting from one idea to another one setup to another, without getting in to depth of any one thing.
Monday to Friday if you rotate through 5 different setup ideas you will end up confused and frustrated.
You will never develop expertise on a setup with that approach. Setup selection involves purposeful sacrifice.
Lot of effort is spent in chasing mirage instead of mastering a setup.

Learn from this very good observation by Ed Seykota on setup

The lizard ... just hangs around on the rock ... and waits and waits and waits ... for his pattern to show up ... and when a bug comes along, he makes his move, right from the gut, without thinking about it.
When trader becomes that automatic, then he, too, can hang around on a rock and catch a lot of bugs.
Say take the 4% breakout setup I ave details and study it in detail and then decide is this what I want to do , then develop process around it and stick to the process, refine it and build small success with smaller position then move to next thing.
Or take the anticipation setup I have detailed and study it on say past 300 movers then setup process and then fine tune it and build success around it.
Or take the $ b/o setup I detailed here and focus on it.
Understanding and perfecting setups take time and effort.
If you keep flirting from setup to setup you will find difficult to master any.

Focusing on likely big movers in market

Posted on 4/08/2016
How to use the IBD Your Weekly Review (85-85)


Every Friday the IBD newspaper publishes a list of stocks under Your Weekly Review. These stocks list is a curated list of stocks with growth and momentum and extremely good source of ideas for growth investor.
Basically it is list of stocks with:
  • 85 plus EPS ratings (that means they are in top 15% in relative rank in terms of their earnings growth)
  • 85 Relative Strength rating (that means in top 15% by price momentum rank )
  • 15% of 52 week high
  • 50 day daily average volume above 100000
Essentially it is a list of growth stocks with momentum. It is published on Friday so that subscribers can study it on weekend and create their watch list for next week.

If you are a growth investor with limited time to focus on market during the week, you should focus like laser on this list. Study the stocks in the list. See if any of them is setting up for a breakout. At what price should you buy it. Where should you put stop, you can figure that out ahead of time.

Study the new entrant to the list as they offer new opportunities in the market. Look at IPO making it to the list and steady them.

Growth investing tries to find few home run growth stocks during the year while swing trading other growth ideas for 10 to 20% gain. The focus of your IBD 85-85 list study should be to try and find that one or 2 explosive growth ideas that are likely to make big move of 100% to 500% or more in a year. Or a growth idea with multi year legs which will keep going up for many years as it is in secular growth trend. ywr4.png

If you subscribe to  Marketsmith, then you can generate this list daily by using a simple scan and that way you may not miss any stock that makes to the list during the week. The image shows how you can do that in that scanner.

The key to using it is to develop a process flow to analyse the list weekly or daily and then identify good anticipation setup and figure out your entry point and then focus on entering that position during the week if triggered.
This is must study list for growth investors.

Range expansions signal start of new move

Posted on 4/07/2016

At the beginning of a up move there is range expansion. Range expansion is a structural phenomenon. That is how the market behaves.

Periods of range contraction are followed by range expansion during up moves. To anticipate a breakout focus on range contraction periods.

Stocks exhibit several range expansions during trends. Trends are never completely linear. Let us say a stock makes 100% move in 100 day, it does not make that move in increments of 1%. It makes it in series of impulse moves.

In reality the 100% move might just happen in 15 to 20 days out of the 100 days. As traders observed this phenomenon , they developed methods to exploit this market tendency.

By trial and error they refined several methods based on range expansion or range contraction. The evolution was craft based. Now with easy availability of computing power the same methods have moved to computers.

Bots can quickly discover range expansion or create thousands of orders on stocks with range contraction in anticipation of range breakouts. So you will see a range expansion quickly attracts buyers.

In order to make range expansion or range contraction based trading work for you, you have to move from the concept to trading methods. Fortunately there are literary thousands of range based methods. 95% of swing trading methods are based on range expansion or contraction.

If you study them , you will not be reinventing the wheels.

The Stockbee momentum burst swing trading setup is based on range expansion. While the Stockbee anticipation swing trading setup is based on range contraction.

If you want to swing trade develop setups around the range contraction and expansion concept. 

Write your own ACTIONABLE Situational Awareness (SA)

Posted on 4/06/2016

Make a habit of writing your own SA everyday. It should be actionable SA like say be aggressive on long side, stay out of market till reversal happen, or anticipate a turn, or tighten stop on existing position, or sell in to strength, or fade this move.
Situational Awareness is very critical for swing traders and position traders. By definition day traders have to trade everyday so it does no matter to them.
Situational Awareness will help you avoid risky periods where your setup is not likely to work. It will help you identify periods where your setup is likely to do very well and then you can step on gas pedal. SA will allow you to adjust your tactics like say letting trade run if your SA tells you this is start of a new bull market. Or take profit early if the trend becomes weak or likely to fade.
While some stocks will work independent of the market direction, majority are influenced by the market. Especially at turning points in market this is important.
If you want to be in this game for long term and keep your profits develop SA skills by practicing daily. You will see that all successful traders have some sort of market timing model which helps them avoid some periods in markets.
Don't focus on what others think. Develop a logical framework for your own SA. My framework is driven by market breadth trends, but you can develop your own framework based on market structure.
Do your own analysis and write just 4 to 5 lines everyday. See if market is acting as per your SA. Refine and refine your process over days or months till you are very confident in the game.
In few months you will develop confidence in your own judgement and SA will become integral part of your daily market thinking.
Above all SA will help you to make and keep money.