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How to find the best anticipation setups

As stock gain momentum they undergo periods of fast moves followed by periods of pullbacks and consolidation. The pullbacks and consolidation periods offer you an opportunity to anticipate a breakout and enter with very close stop or enter with order few cents above the consolidation. 




To anticipate a breakout look at stocks currently not undergoing momentum burst. That means stock should not be going up or down fast. 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. During rallies stock go through high volatility and low volatility periods, the low volatility  (quiet) periods are where anticipation traders can focus. 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 to find good anticipation setups. You can look for stocks with bollinger band squeeze. I do not use them, I find it easier to just look for series of narrow range consolidation periods. 

Avoid Anticipation setups on extended stocks. First or second anticipation setup in established trend is best. As stock goes further and further from its rally start point the probability of anticipation setup working decreases. Extended trends needs to be avoided for anticipation as failure is high on them


Once you have anticipation candidate ,look for early entry on it. If you wait for breakout to buy then the entire effort is wasted. Ideal entry is where you risk just few cents or less than 2% to get in early. This requires either entering before breakout or entering with a order few cents above yesterday's action.

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 as you can also capture breakout day gains. 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 or open. It takes me around 15 minutes to generate my list of candidates daily.



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
Here is my watchlist for today

HOV KMX TSN VNET ALB SKX SQM LIT JELD SPPI PPC CC ILG COHU HII ROST VERI

Anticipation is a setup concept that can make you money

Posted on 10/26/2017


As detailed here I trade only one kind of anticipation setup: anticipation  as continuation setup on stocks with established momentum.
But you can use same kind of approach to trade lot of other types of anticipation setups.
If you want to do position trading look for ants on weekly timeframe where there is 4 plus weeks of tight tight tight consolidation . For that select stocks with longer term momentum using say MDT or DT and that are withing 25% of 52 week high.
You can use anticipation setup to find shorts on high momentum stocks for swing trade.
You can find anticipation setup on stocks forming bottom.

How to get in to breakout early and with close stop


YPF was showing up in anticipation scan for last 6 to 7 days. It had very orderly and compact sideways consolidation after  a swing high move in September.

The high of consolidation was 23.13 , I had buy stop outside that at 23.25. That got triggered early yesterday and stock started moving immediately. So stop could be put at low of the day at 23.02. After that stock just kept going up and closed near high.

Anticipation scan allows you to find candidates like these daily and plan the trade in advance. The setup gives you very early entry in to breakout and stop can be close.

You can find mt detailed videos on how to find these setups daily on youtube. 

Here is my watchlist for today

STMP
ALNY
PARR
ZYNE
CRS
KURA
FND
RDNT
BGCP
LOPE
BZH
ARWR
BANC
MCRN
BCOR
ATEN
ADNT
MTBC
DS
BSX
BWA
YUMC
APTS
ILG
CLGX
POT
FSNN
GPK
ALRM
RHT
TSN
NEWM
INOV
LIT
CTMX
GDI
COUP
STZ
OSK
CDNA
BCC
MTOR
TRUP
HALO
MU
NTNX
VLO
KMX
ANAB
PANW
LEA

How to find good breakouts daily

Most stocks start their swing move or big move with a 4% breakout. You can validate this for yourself by looking at every big winner last year.
Stock moves start with a momentum burst and that basic tendency of the stock moves has not changed since stock markets started.
If you just do a good job of focusing on 4% breakout you will find the best opportunities in market every week.

Process Loop

I run scans like 4% and $ breakout along with my anticipation watch list and low threshold breakouts throughout the day and trade candidates as and when they show up and meet my criteria.

The 4% scan and process loop

c/c1>=1.04 and v>v1 and v>100000
The scan looks for a stock with price and volume surge.
The stock should be up 4%,
volume should be higher than yesterday
and volume should be greater than 100000.
Once you run the scan you will get several stocks meeting the scan conditions , but they are all not buy candidate.
A buy candidate should meet the setup definition for a breakout swing trade. If the context of the breakout is right , it should be bought for 3 to 5 day hold trade.

A good setup should show following characters:

stock should close near high
prior to b/o day there should be a narrow range or negative bar
stock should not be up 3 days in a row
stock should have a narrow range sideways consolidation or narrow range orderly shallow pullback prior to b/o day
the previous leg of up move should be linear
the breakout should be first to third setup since start of the move
as far as possible look for young trend and not extended trend ( youngsters defined by number of days stock has been rallying in overall move)
first and second pullback/consolidation in rally are preferable
extended rallies are vulnerable to correction and b/o failure
In process term I run the above scan from 9:30 onward and look for candidates meeting setup definition. As and when they show up I enter. The stop is low of breakout day
This is an example of process flow to find swing trades daily.

The $ b/0 scan and process loop

c-o>=.90 and v>100000
The scan looks for a stock up 90 cents plus. It is more useful on high priced stocks above 40 as they do not often breakout with 4% move.
The stock should be up 90 cents plus.
volume should be greater than 100000.
Once you run the scan you will get several stocks meeting the scan conditions , but they are all not buy candidate.
A buy candidate should meet the setup definition for a breakout swing trade. If the context of the breakout is right , it should be bought for 3 to 5 day hold trade.

A good setup should show following characters:

stock should close near high
prior to b/o day there should be a narrow range or negative bar
stock should not be up 3 days in a row
stock should have a narrow range sideways consolidation or narrow range orderly shallow pullback prior to b/o day
the previous leg of up move should be linear
the breakout should be first to third setup since start of the move
as far as possible look for young trend and not extended trend ( youngness defined by number of days stock has been rallying in overall move)
first and second pullback/consolidation in rally are preferable
extended rallies are vulnerable to correction and b/o failure
In process term I run the above scan from 9:30 onward and look for candidates meeting setup definition.
As and when they show up I enter. The stop is low of breakout day.
I am looking at hold periods of 3 to 5 days on these trades or even lower as long as they give 8% to 20% profit. For $ b/o I am looking for 5 to 20 dollars move in 3 to 10 days. Once I am profitable I am looking to move stop to break even and protecting open profit aggressively once it is more than 8 %.

Where to exit

image
These exit guidelines are specific to swing trading and 4% and $ b/o setups.
Exit at least 50% of position on third day at close. by third day the moment stocks goes up start protecting profit by moving stop 25 cents below the high.
When swing trading it is critical to take profits in to strength.
After your entry next day or same day if the stock goes up 8% or more exit 50% of the position and move stop 25 cents below the high of the day to protect profits.
Exit a stock in pre market or at open if it gaps up 20% or more after your entry next day or third day.
The essence of swing trading is about capturing such explosive moves and selling in to strength.
If a stock does not follow through in 3 days exit or move stops to break even If stock starts to fade gain after entry exit same day.
If you study the stocks up 25% or more in a month you will see that they make bulk of their move in 3 to 5 days out of 21 trading days in a month.
Typically most of them go up for 3 days after breakout and then spend next few days going sideways or giving up part of the gains made during those explosive 3-5 days.
These are exit guidelines for swing trade not absolute rules..

Best breakout candidate typically show up in first 30 minutesHow to find good breakouts daily

Stocks move from low volatility periods to high volatility periods

Posted on 10/16/2017


43552_stockbee_bee_only_trans_background.png

Stocks move from low volatility periods to high volatility periods

Stocks spend time in low volatility periods during which time they have orderly consolidation or pullback. Such low volatility periods are characterised by cluster of small daily up or down moves on relative low volume .

Let us look at recent example of PH trade

ph.png

Stock formed a cluster of compact moves. The highest %  move in 56 days was .21%. On upside and -0.15% on down side.

Such volatility compression periods are followed by range expansion in direction of the move most of the time.

This allows us to put buy stop just near or slightly above the cluster of moves high. Stop can be very close.

Because stop is so close to entry you can put in lot of capital on a trade like this  making it a good risk reward trade.

The low volatility cluster takes some days to form, so you can plan this trade in advance

How can you find setups like these

In order to find setups like these you need to scan for stocks having cluster of small moves in last 3 plus days.

The Anticipation scan which I have shared multiple times in recent videos will show you how to find this.

The Anticipation scan which I shared is more broad based but if you want to go deeper and narrow it down to less than 3 to 5 extremely high probability setups then you need to modify it to find cluster of moves like in above PH example.

You can modify the scan for finding these kind of setups without going through 800 stock charts by looking for only half of 1% move. The modified scan will give you 75 candidates to look at.

Let us look at PNR as a stock I am watching today which is similar to PH

pnr.png

Now in this case a buy stop just few cents above recent volatility compression can get us into a good breakout trade with very close stop.

Some more setups like this for today :

gpc.png

kmx.png

dhi.png

DHI might need few more days to setup even better.

Do you want to find and trade setups like these

All that you need to do to find setups like these is to scan daily for them on stocks with established momentum and spend less than 10 minutes to find 3 to 5 good ideas.

Once you find good idea create a buy stop order or enter on price alert. Stops go near low of entry day or low of consolidation.

It is a planned trade so no emotions involved.

If you are serious about making money swing trading develop a bunch  setup ideas like these which offer you extremely low risk profit making opportunities with a planned trade ahead of time.

If you want to be a profitable trader you must understand momentum

Posted on 10/03/2017


It is the most persistent tendency of stocks and it offers you multiple ways to make money. 

A thorough understanding of momentum and how to make it work is something every trader must focus on.


Starting next week I will be discussing momentum for a month

 Specifically I will focus on following  topics.
--------

Understanding momentum

Why you should master momentum

Momentum is structural tendency

How to profit from momentum

Ways to calculate momentum (TI65, DT, MDT, IBD RS, Minervini template, M20, Rel strength)

Momentum swing trading breakouts

Momentum swing trading using anticipation

Momentum swing trading pullbacks

Momentum for long term investors using DT , MDT, EP, and Minervini scans

Momentum strategies for  ETFs


Momentum +growth

Momentum+value

Momentum+chart patterns


Momentum Based short selling


A thorough understanding of momentum will give you life time rewards.