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How to find high probability shorts

Posted on 3/29/2018






When a stock that has been rallying for few months to years has a high volume gap breakdown with volume on breakdown day above 9 million (you can even reduce this to 5 million if you want more candidates) , it often signals end of wrong running trend.

Stocks like these become good short candidates after a brief bounce. This is a high probability setup.

In a year depending on market conditions 25 to 200 such setups show up. They offer 20% to 90% profit potential moves once they breakdown. This setup works best on stocks that were up 300% plus in 2 years or less before the high volume breakdown.

It is very easy to setup scan to do this in most software. I scan for these in Telechart and create a watchlist.
Some Recent Examples







If you are serious about making money trading develop a set of short setups. That will allow you to profit from stocks going down.


Big structural trading ideas that can make you millions


If you want to trade the market find the "big" basic and structural tendencies of the markets and build your setups around them.
A structural tendency of market is some kind of observed behavior of stocks that repeats .
For example stocks with surprisingly good or bad earnings tend to go up or down for several days post announcing such earnings . It is called PEAD (post earnings announcement drift). This is proven phenomenon across world market and has persisted since market came in to existence.
Now knowing this can give you big edge if you can convert it in to tradable setups. Doing this alone can make you millions.
Find similar structural tendencies of stock market and you will have found key to making money in good or bad time.
The structural tendencies of stocks give you a process oriented solution to finding opportunities. If you select the right kind of market structure to focus on you increase probability of success in the long run (there still will be periods when your structural phenomenon may not work due to some change in market structure or your own failure as a trader to exploit that , but in both cases it is a fixable issue.

Sooner you find an exploitable big ideas in your trading career better it is as it will save you time , frustration and money.

Here are some "big structural tendencies of stocks"

momentum

It is the inherent tendency of stocks to move in direction of pre established momentum. Study this in detail and you will find many ways to make money. Over last 18 years momentum has made me millions. It is one of my favorite big idea.

earnings

Earnings are the lifeblood of any enterprise. Stocks with good earnings outperform in short term as well as long term. There are many exploitable trading setups you can build around earnings. Earnings Episodic Pivots is one such setup I have traded very successfully for last 18 years. In last few years I have added more earnings related setups to the mix.

volatility cycles

Stocks go through phases of volatility contraction followed by expansion. During volatility contraction period stocks have series of range contraction days. If you can identify and exploit such periods it gives you very low risk entry in a explosive move. The anticipation setup I trade is based on this :big " idea. There are many other ways to trade same thing. @cammotrader ( a member of stockbee members site) is giving you a master class in using this structural tendency in a different way. There are many many ways to trade this structural tendency. Once you study this you will find ways to make money with very little drawdowns.

growth investing

Growth stocks make some of the most explosive moves in the market. New businesses , new ideas, new segments are constantly created in the world. Stocks with above average growth in profit and sales can make dramatic moves in short period of time. As a trader if you develop a setup to exploit this tendency you can grow your account aggressively. The IBD based scans and setups I have shared are based on growth as "big " idea.

value and turnaround

Stocks that are cheap for variety of reason can often make big moves once market perception about them changes. Value investors have exploited this structural tendencies for centuries and this is proven structural tendency of market. If you research this approach you will find many ways to make money from value stocks. I do not trade any value based method or setups as I find enough ideas in momentum and growth.

technology stocks

Ever since markets were invented one sector has always stood out : technology. Nature of technology changes but new technology stocks outperform all other sectors in any market cycles. Focusing on technology stocks and especially getting early on to a new technology will help you make big money. If there is only one industry or sector you want to focus on . focus on technology.

biotechnology

Some of the biggest winners every year are biotechnology stocks. Investing in biotech is risky but highly lucrative. Biotech stocks have highest probability of making 300% plus moves in shortest time period , sometime in days or weeks. There are special skills and knowledge required to trade them , but if you can build that skill you can make ton of money.

all these are examples of big ideas which if you invest 6 month or a year you can build long term profitable career.

If you are serious about making millions trading , focus on these big ideas.

Study different variations of same setups

Posted on 3/21/2018


Any setup idea has many variations.
A setup like anticipation can be 6 to 8 type of different setup with its own unique characteristics and risk reward and holding periods.
Beginner traders tend to think in simplistic terms and are constantly looking for "one right way" or "set of fixed rules". And get frustrated when they can not find it
But in reality there are many variation of any setup pattern.
Anticipation after a big gap up on news catalyst is one kind of a setup. It has different risk reward potential and in most cases is longer term swing trade. SFLY on 2/13/2018 will be example of that . and if you study hundreds of big earnings gaps you would find several of them. If you find that kind of anticipation setup it is not a few days hold , it could be multiple day or months hold. DDS VCEL today is example of that kind of setup.
IPO anticipation setups have different characteristics. They tend to form near recent lows post IPO. They tend to be more volatile setups compared to normal stocks with 6 month or year plus trade history. Look at PAGS on 2/14/2018. HMI on 3/1/18. Those can be very profitable if entered in anticipation. Many of them have lower than 100k liquidity on ants days.
High priced anticipation setups have very different risk reward profile. High priced to me is in two categories 39 to 100 dollars is one and 100 dollars plus is another. In this you can get best risk reward setups if it has less than 25 cents net change on ants day. Look at WEX on 12/14/17
like this there are many variations of ants....
If you are serious about making money trading ants study and document them.

ALL THAT I WILL TELL YOU IS THERE IS FREE MONEY OPPORTUNITY FOR SMART TRADERS IN ANTS.

Do not want to give out too many secrets...

How to setup MDT scans and charts

Posted on 3/16/2018



Stockbee MDT (Modified Double Trouble) is a longer term momentum indicator. It uses absolute momentum on 126 days timeframe to isolate strongest stocks in the market. MDT can also be used to rank stocks and find relative strength leaders. MDT is more suitable for finding longer duration trades.

MDT Bullish Scan

c/avgc126>=1.19

MDT Bearish Scan

c/avgc126<=.81


MDT Sort column



MDT chart template Bullish







MDT Chart template Bearish

How to setup Trend Intensity scans and charts








Stockbee Trend intensity (TI) is a momentum indicator which tells you direction and strength of a trend. It allows you to find stocks with absolute momentum and rank them on momentum (or relative strength)





Bullish Trend Intensity 65 days (TI65 bullish)


avgc7/avgc65>=1.05


Bearish Trend Intensity 65 days (TI65 bearish)


avgc7/avgc65<=.95


Bullish Trend Intensity 65 days Young (Young TI65 bullish)


avgc7/avgc65>=1.05and AVGC7.25 / AVGC65.25 <= 1.05

Trend Intensity 65 days (TI65) as column


avgc7/avgc65



Bullish Trend Intensity 65 days (TI65 bullish) Chart template



Bearish Trend Intensity 65 days (TI65 bullish) Chart template




Bullish Trend Intensity 65 days Young  ( Young TI65 bullish) Chart template




Trend Intensity is a powerful tool to make money in stock market. It allows you to focus on stocks with fastest momentum in the market.

By buying or selling fastest moving stocks you can amplify your returns.

Early morning is good time to find today's big winners

Posted on 3/15/2018


News catalyst can often trigger big moves. Earnings is the number one stock mover. Earnings are released after hours and pre market.
A massive earnings surprise on a stock with multi month base can lead to big rallies lasting weeks or months.
Focusing on "massive Earnings acceleration " will help you find 5 to 20 big ideas in a year that can make 50% to 1000% move.
In order to find such massive acceleration you need a structured approach to track after hours earnings news.
It should be efficient process which should only take 15 minutes...

How many of you would want to spend daily 15 minutes to find potential 50% to 100% move????

In order to do this successfully you need very streamlined process. If you just tracked these handful of links you should be able to find big winners periodically.
  1. Zacks Earnings : https://goo.gl/CsJviq
  2. Seeking alpha earnings news https://goo.gl/zkAKiB
  3. Earnings whisper calendar https://www.earningswhispers.com/calendar
  4. Earnings Whisper email summary : you need to sign up for this . it is free
  5. WSJ post market winners https://goo.gl/9ZYmW7
A blowout earnings stock will not be missed if you do this daily.
Besides earnings news other news can also move stocks , but earnings will give you most bang for bucks for your 15 minutes.

How to learn to be profitable trader

Posted on 3/08/2018

The single most important thing to long term trading success is your ability to survive the learning curve without losing your capital stake.


If you are a beginner to trading you do not have well developed idea about what works in the market or how to make money in the market. It takes time to find a profitable setup idea and perfect it to work for you.

During learning phase you will try all kinds of time frames from day trading to position trading, you will try all kinds of methods from logical to illogical, you will try all kinds of newsletters to gurus, but the most important thing to remember is you must have your trading capital intact during this entire learning phase.

If you blow up your account or take big draw down , you will be out of this game very quickly.

The process of developing your own setup is costly and involves several trial and error. You will also be constantly bombarded with marketing claiming this the only and best way to make money. Reality is there are several ways to make money in the market. You have to find something that works for you and fits your capital level and time commitment.

Broadly there are some big setup ideas that most profitable traders use to make money , once you understand that then the challenge becomes to develop a process that will exploit that setup ideas.

Momentum is the most common idea traded by most traders. They give it different name but underlying concept behind the setup is always momentum. Momentum is the tendency of stocks to move in direction of pre established momentum.

Momentum is proven market tendency. Stocks with 3 month or six month or one year momentu tend to go up for next three or six or a year. If you know this you can develop several ways to profit from this inherent tendency of stock. It allows you to focus only on stocks with established momentum and avoid stocks not favored by market.

There are several ways to rank stocks by momentum or find when stocks enter momentum phase. Traders buy once momentum is established and fold when momentum starts dying .

Some traders trade same stocks as swing trades. Most momentum stocks during their entire moves have corrections or pullbacks. Traders buy these corrections or shakeouts and then sell when momentum peaks.

If you are a beginner trader or struggling trader first thing you can do is to setup a momentum method . Momentum burst based swing trading is easiest way to get started . ( This site has extensive and free resources on setting this method)

Earnings is another powerful fundamental tendency of stocks that can be used to make money in the market . PEADS or post earnings announcement drift is a well known tendency of stocks. Stocks that have surprisingly good earnings or bad earnings tend to move in direction of that good or bad earnings. Growth investing methods like IBD CANSLIM are based on that. The CANSLIM marries best of both world. earnings plus momentum. ( This site has extensive and free resources on setting this method)

These are two big ideas which if you start using right at beginning of your trading career you will find success quickly.

If you want to reduce your learning curve and mot lose money base your early method on something that works and then over the years refine it.

But remember if you lose your capital you are out of the game.....

How to make money without losing money

Posted on 3/07/2018


To me the objective of trading is to make money without losing money. As far as possible I want zero drawdowns and no gyration in account. At the same time I want to grow the account aggressively  without using wild margin . 

It is the high wire act of managing this twin objective of making money and not losing money which one needs to develop skill in. Once you can do it , it is almost like free money strategy. Your downside is very limited and upside is unlimited. 

How can you do this if you are serious about making money trading ?

Select Proper setup with low risk

The first starting point is to select setups that offer you very low risks in case trade do not work out. Your risk in any trade at start of a trade is Risk= entry-stop

If your entry is very close to stop you have very low risk trade and in that case if the trade works your risk reward is very good. 

What kind of setups offer this kind of situation ?

Anticipation setups offer that kind of trade. The second best setup after anticipation is $ breakout. Most dollar breakouts that happen after a consolidation on high priced stock where the consolidation for several days was tight consolidation with moves capped at below .90 cents is very low and high reward setup. 

Anticipation setups like TSLA above are what I look for on a daily basis. In above chart stock traded down 14 cents two days in a row. A breakout from that level led to 8 dollar move next day. These kind of setups offer you very close stop to entry. TSLA went on to make 19 dollar move from that breakout.



This is a recent trade I made. Stock was down 4 cents before breakout. How close is your stop to entry in such cases. Stock just took of next day on breakout and I highlighted it just pre breakout on members site. 


When you find setups like this it is like finding free money.

Develop skills in trading anticipation setups

In order to become good at finding and trading setups like this you need a detailed process map to find them , plan a entry , plana stop , plan to manage stops during move , and a plan to exit them.

It takes time to develop skill like that. If you do this daily for few months you will become good at it. At first you will not know what to look for in a good setup but once you practice finding the very best ideas, anyone with average intelligence and motivated to make money can do this.

Use Buy Stop Limit Orders for entries

In order to get good entries in these kind of setups you can use BSLO orders. These orders are placed in advance before market open and are limit orders with  trigger prices and cap on price at which you will buy in case it triggers. The order also allows you to attach stop once entry gets activated.

Study historical patterns like these on stocks in last 3 months

Best way to learn this setup is by studying past examples of immediate period of last one month or 3 months.

Develop your own setup books by capturing several past examples of this. If you do that you will be instantly able to find A grade setups in current market.

Manage the trade post entry

Part of the skill in managing trades like these is to move stops to breakeven quickly once trade goes in our favor. Remember we are looking for free money in these kind of situations.

After trade is profitable keep moving stops aggressively or sell in batches. I sell my positions in lots of 20% or 25% along the way to lock in profit. I allow a small part of the original capital to ride longer with slightly wider stop.

Do all your work and planning before market opens

Anticipation trades are planned trades. You have so much time to think through on these trades between last night and market open. Ifd you do a good job of planning everything , you will have very few surprises once market opens and you will be in control of situation.

Supplement Anticipation setup with $ breakout, 4% breakout and Episodic Pivots setups

If you do good job of anticipation you will have more time to spend on other setups like $b/o, 4% b/o and EP.

$ b/o is next best setup after anticipation. Often it allows you entry with stop below 2%. The setup works  on high priced stock. It allows you to put lot more capital at risk on single trade.

Ignore the market noise and use situational awareness

If you have good setups and good skills in executing them , just ignore the market noise.

I trade my setup with very aggressive risk management without worrying about what market is doing . All these setups are self adjusting . If market is weak you will find more bearish sertups , if it is bullish you will find more bearish setups.

If you spend too much time on Twitter and other noise creating platforms , you will get influenced by that and not execute your strategy.

Trade to make money

If you are not very clear about why you are trading you are unlikely to make money. If you go with objective of making money in trading you will clearly follow a path of good profitable setup selection and stock selection .

If you want to make money trading you will take responsibility of your trading success and not blame others or market or luck for your lacklustre performance.

Surround yourself with successful traders

If you are pat of successful traders tribe you will benefit from the expertise and experience of those traders.
You will be exposed to new ideas and offered constructive criticism on your own ideas or troubles.

If you want to be profitable trader , hang out with other profitable traders


The foundation of successful trading is proper setup selection and then developing a process to execute that setup. The day you recognise that and commit to it, you will start making money....

Buy breakouts or pullbacks

Posted on 3/06/2018


Breakouts and pullbacks are most widely traded setups.
Everyone gives their own setup variation of basic idea a new label, new name and new illusion of secret sauce.
Basic setup ideas like breakouts, pullbacks, fading extreme strength or weakness, volatility expansion and contraction, and event driven breakouts or breakdowns have been around for ages.
Take a setup idea like breakout or pullback , study it, if it makes sense to you and you want to trade it then spend significant effort and invest in the setup idea.
What do I mean when I say invest in a setup idea.
It means go in to significant detail of the setup idea. In order to make a setup work you need to really internalize the setup and make it part of you.
The setup needs to move from just an idea to a instinctive reaction and behavior for you. It has to become "your' setup.
In order to do that you can study historically how it has worked. Some people do that by backtesting. Some do it by manually checking history. That means studying historically how the setup worked.
Studying 1000, 5000, 10000 past instances of the setup ideas. And then from that derive leanings. That process is what is the key to building a long term edge in trading a setup.
Expertise is developed by extensive study of narrowly defined field. When you spend significant effort and time on the setup there are permanent changes that happen in your brain. It alters the way you think or act when the same setup situation happens next time.
Such extensive setup study is common theme among traders biographies.
When Livermore had a setup idea, he would go back in to his price records and see how it worked in past. He would always have a pad and pencil next to his bed according to his biography.
If some setup idea hit him in the night , he would write it down and then next day he would research it. Near the end of his career Livermore wrote a book about setups that made him big money and how he discovered them. It is a good summary of what worked for him.
Darvas did same thing, he extensively studied the market and tried styles ranging from day trading, scalping, penny stocks, to newsletters and the work. Once he found his setup idea he extensively studied it and then setup his own rules to trade it.
Richard Love in his book Superperformance Stock also explains how he studied every stock that tripled in last 30 to 40 years. Then went back to see what factors lead to super performance and then formulated his own setup ideas. He was an expert on his setup idea.
William O'Neil built on the work of Love and built his own model and setup based on study of historical best performers.
Every trader who makes it in the market and survives decades in the market goes through similar process consciously or unconsciously.
They take a simple setup idea and spend time , effort , and money to perfect it. Then the setup becomes part of them.
If you invest significantly in setup idea you will find unique patterns and nuances that others have not found.
The effort makes you expert on their setup and when trading the same setup in current market you can instantly in their mind compare the setup to 20000 or 50000 past setup.
As against that most novice traders will abandon a setup if it does not work for 2 to 3 trades. Instead of investing in one setup idea for long period of time they flirt from setup to setup.
Significant investment in setup ideas is a recurring theme in every successful traders biography.
Most of us are not born traders.There are some who can instinctively get a setup idea in few minutes or weeks but most of us are duffers when we get in to trading. The solution to us duffers is to put in significant effort and then our game will improve.
Narrow your focus to one setup idea and exhaust all your effort on it before flirting with other ideas. and when doing that first select ideas that have worked for 100 years or more.
The two basic setups of breakout and pullback have been around for ages .....

4% breakout is a breakout setup

$ breakout is a breakout setup

EP is is a breakout setup

Anticipation is a pullback setup

You can create many variations of these setup ideas

How to find big winners using pre market gap stocks

Posted on 3/02/2018

Big winners are triggered by earnings releases. Stocks with rapidly growing earnings attract buyers and funds attention on earnings day if the earnings were massive acceleration.
The stock will gap up and go. Which makes your life even easier as you just have to focus on handful of stocks up 4% plus pre market. Investigate their earnings release and see if there is a "Massive Earnings acceleration" surprise.
"Massive Acceleration " married with months of base or "neglect" is what produces big moves as funds buy these stocks aggressively . If you can find these stocks on day of earnings , you are smarter than the smartest money on the street . And all it takes is 10 to 15 minutes of running a process to find these.

MAGNA

MA massive earning acceleration
G gap up
N neglect of few months to years 
A sales acceleration
Look for these criteria in any gap up..
In order to do this successfully you need very streamlined process. If you just tracked these handful of links you should be able to find big winners periodically.
  1. Zacks Earnings : https://goo.gl/CsJviq
  2. Seeking alpha earnings news https://goo.gl/zkAKiB
  3. Zacks Earnings surprise charts https://goo.gl/xgXYAj
  4. Earnings Whisper email summary : you need to sign up for this . it is free https://www.earningswhispers.com/
  5. IBD highlighted stocks with good earnings https://www.investors.com/ paid
  6. Marketsmith (paid)
A blowout earnings stock will not be missed if you do this daily.
Most will gap 8% plus and go up 20 to 50% on earnings day itself.
I many times buy these kind of stocks in after hours or pre market itself.
If you missed the first day move , you can wait for it to form a valid anticipation setup and buy it or buy it on valid 4% or $ b/o.
If you have Marketsmith you can scan for such stocks and create a watchlist. I have shared a scan for this in Marketsmith scans document.
Pay special attention to stocks that gap up with MGNA criteria and volume above 1 million on breakout day. Even better is b/o with 10 million plus volume. The real big ones will often have That indicates massive fund buying .

Pay attention to first or second "massive Acceleration" 
Five to ten big ideas like this in a year can make you year.
And all it takes is 15 minutes...

So what is your excuse for not finding them.....

How to find tomorrows big winners

Posted on 3/01/2018

Night Time is right Time to find tomorrows big winners

News catalyst can often trigger big moves. Earnings is the number one stock mover. Earnings are released after hours and pre market.
A massive earnings surprise on a stock with multi month base can lead to big rallies lasting weeks or months.
Focusing on "massive Earnings acceleration " will help you find 5 to 20 big ideas in a year that can make 50% to 1000% move.
In order to find such massive acceleration you need a structured approach to track after hours earnings news.
It should be efficient process which should only take 15 minutes...

How many of you would want to spend daily 15 minutes to find potential 50% to 100% move 

In order to do this successfully you need very streamlined process. If you just tracked these handful of links you should be able to find big winners periodically.
  1. Zacks Earnings : https://goo.gl/CsJviq
  2. Seeking alpha earnings news https://goo.gl/zkAKiB
  3. Marketwatch https://goo.gl/I0aPs4
  4. Earnings Whisper email summary : you need to sign up for this . it is free
  5. IBD highlighted stocks with good earnings https://www.investors.com/
A blowout earnings stock will not be missed if you do this daily.
Besides earnings news other news can also move stocks , but earnings will give you most bang for bucks for your 15 minutes.

If you are serious about making money trading develop  skills in trading earnings breakout setup. One good earnings breakout if traded with sufficient size can help you payoff your mortgage. 

Marketsmith Scans to find growth stocks

Marketsmith is a scanning software offered by Investors Business Daily. It can be used to find growth stocks.
Growth stocks tend to make big moves during their aggressive growth phase. Identifying these stocks during such growth phase can help you find and trade many profitable moves.

EP 100/19

This scan is good for finding extremely fast  profit growing companies. For example a stock like SQ would show up on this scan last year during its fast move last year. 



EP Projected 50% EPS

Market is forward looking so this scan looks for stocks whose estimated growth is high for next quarter and next year.



EPS surprise 99% plus and growth 40% plus

Market rewards companies with big earnings surprise. PEADS post earnings announcement drift is well known stock tendency. This scan will help you find those stocks. 


Sales Growth 39% plus
Some companies are not yet profitable but growing sales rapidly. These are typically early stage growth companies.



Sales growth annual and quarter 39% plus

Both sales growth for quarter and year are above 39%.


IBD Cream
Classic growth stock screen to find stocks with good sales, eps, and margin.


IBD 29/29 EPS leaders Early Detection
Future leaders in earnings you want to find early. 



IBD 909090 (for busy people run only this scan)
High quality growth stocks with momentum currently favored by market. 



Mark Minervini Code 33
Based on his book


IBD funds increase
Stocks being aggressively bought by funds in last six month


IBD funds Decrease
Stocks being dumped by funds aggressively

IPO 8 years Profitable
Young companies with growth can be big movers . This finds stocks that IPOed in last 8 years and are profitable 

Brazil


China


Three Year growth Stars (for Duration moves)
Some companies can grow for long period of time. They tend to make multi year moves.
Five years growth star (for duration moves)
Similar to scan above but with last 3 year growth faster than last 5 year growth. These are rare stocks.