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How to make money anticipating a breakout

Posted on 6/30/2020
CALX is a good example of kind of anticipation setups I look for. It was in my anticipation scan on Friday and I entered early on Monday. Stock went up 7.50% for the day.


On any given day there are opportunities like this if you take the effort to identify stock setting up for possible breakout.

When stocks are in established momentum phase they do not go up everyday. They go up and then pause and then go up in next impulse move. When they pause and if that pause leads to low volatility consolidation with low volume then there is a high probability such consolidation will resolve in a breakout. This is inherent nature of stock moves.

In order to profit from this opportunity, you need to identify such stocks and have a watchlist ready. There are two ways to do this daily:

  • brute force approach 
  • smart force approach
The Brute force approach involves going through every stock that meets certain momentum parameter and then visually identifying such setup. Many trader do this by going through 1000 to 1500 stocks that satisfy their momentum parameter. It is time consuming effort and takes few hours.  

The Smart Force approach involves using a well designed scan to narrow down these setups and then look at anywhere from 30 to 100 stocks that meet the criteria. This significantly reduces your effort and takes 10 minutes to do. I use the Smart Force approach. 

Once you identify opportunities like these you can enter then in anticipation without waiting for confirmation or  put price alerts or put limit buy orders above a certain level for entries. 

These setups are lower risk setups than breakouts as your top is very close compared to breakout.  They also allow you to plan your trade. 

Here are some of the setups on my watchlist for today based on my Smart Force approach:



QCOM
ESTC
QIWI
QRVO
THO
NVTA
IIVI
MGNX
RLGY
CLDX
CREE
CYTK
PPD
EA
SWKS
KRNT
RH
ZI

LLY 

If you learn a setup like this you can find money making opportunities daily. 

How can working people make money

Posted on 6/25/2020
Many working people have busy life and do not get to look at markets during day. However due to zero interest rate environment need to make money and grow their account.

This offers a special challenge but , they can still make lots of money if they understand market structure and develop trading expertise in some select setups.

Quickfire trading or swing trading may not be suitable for these people. They need to focus on stocks that breakout with ultra high volume. For Stockbee members I recommend stocks that breakout first or second time on 9 million plus volume and even better 49 million plus volume. 

These kind of high volume moves indicate big institutional buying and can be good point for working people to get in . Using few additional filters with the scan helps you narrow down the best opportunities. 

One of the best periods for breakouts

Posted on 6/23/2020

Amazing strength in market means breakout based strategies are working well.

In market like these momentum based breakouts and momentum bursts are making big moves and many are making moves larger than they would make in months.
How long this will last is not known but as of now , it is minting money.

Once the move slows down anticipation and pullbacks would work better. 

Momentum is structural

Posted on 6/17/2020

Momentum is the speed or velocity of price changes in a stock, security, or tradable instrument.
Momentum shows the rate of change in price movement over a period of time to help investors determine the strength of a trend.
Momentum = Price today - Price n periods ago
Momentum measures the velocity of price changes as opposed to the actual price levels themselves.
Momentum is tendency of stocks to move in direction of established trend.
Momentum is universal phenomenon
Momentum on 3 6 12 month tends to last for next 3 6 12 months.
Momentum on short time frame of less than one month is mean reverting
Momentum on 10 days or less timeframe with magnitude of 205 plus is even more likely to mean revert
Momentum on longer duration of 3 years plus tends to mean revert
Momentum is usually calculated as ratio of price to MA or as ratio of 2 moving averages
Momentum can be absolute (TI65 above 1.05 or MDT above 1.18) or relative when used to rank
Momentum used as absolute momentum tells you when it started and ended
Momentum used as sort only tells you how stock is ranked relative to other stocks
Momentum is used to narrow trading universe by focusing on stocks with high or low momentum
Momentum relative to S&P is used to select stocks in many methods
Momentum typically when used on 6 month timeframe is used with one month lag as one month momentum has strong mean reverting tendency (MDT25 is example of this c25/avgc126.25)
Momentum is used to isolate Top 25 or Top 50 or Top 200 stocks and then that list is used to find anticipation or pullback setups
Momentum is the most persistent tendency of stocks across world market
Momentum on lower priced stock is of higher magnitude
Momentum on higher priced stock tends to be lower
Momentum on low liquidity stocks tend to be higher
Momentum on high liquidity stock is lower
Momentum is foundation of Top 25 method
Momentum is the structural tendency exploited in ROC TI65, MDT , DT and 3/300

Recommended Setups based on your style

Posted on 6/11/2020

Specialise


Do not try to be jack of all trades.
Focus on few things and do them well.
If you have medicine background focus on healthcare , biotech stocks.
If you are technology person focus on tech stocks
If you are working person focus on 9 million
If you are growth investor , just focus on that.
FOCUS FOCUS FOCUS

Recommended Setups based on your style


Aggressive Swing Trader looking for triple digit plus returns  : 4%, $, LTB, Ants, Ants plus plus plus, Reversals, Top 25 , 9 mil , 49 mil 3/300 , TI30 , gaps fade, intraday trades on select lists
Beginner Swing Trader: 4% $
Day Trader : 3/300
End of Day swing Trader: 4% $ LTB
Working Person with limited time : 9 million and 49 million breakouts 
Extremely Busy : Top 25

Within this stocks from three sectors healthcare , Technology , and Consumer discretionary are top focus. 

Learn from Top hedge funds

Posted on 6/10/2020

Why do you think top peforming hedge funds are either Tech or Heathcare focused

Are they stupid or crazy. Only 2 out of top 2 are multi strategy.
Focus on few sector or one sector and do the best job you can , let others do multi strategy .
If you want to improve your performance go Tech or healthcare route.
Do not try to be jack of all trades.

Focus on few things and do them well.
If you have medicine background focus on healthcare , biotech stocks.
If you are technology person focus on tech stocks
If you are working person focus on 9 million
If you are growth investor , just focus on that.
FOCUS FOCUS FOCUS

Finding growth stocks

Posted on 6/03/2020
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.