How to make money anticipating a breakout
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:
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.
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5 comments:
What kind of stop would you setup on this type of trade? I see the stock had very narrow rand for 4 to 5 days. I have been trying to trade like this but what are you looking for in the first 30 minutes that prompted you to enter the trade? Is it above yesterday's high or the previous two day's high?
Stops are between 2 to .5% based on quality of setup. I have price triggers and alerts set for these kind of stocks so that is how I get in. many I buy without waiting for confirmation. The price triggers are based on previous day close plus or minus 10 to 25 cents. There are many tactics to make these kind of trades work.
I am making it part of my daily routine to check this blog. I'm breaking for lunch and wanted to look for anticipation
breakout videos of yours but thought to check today's post first. What a fitting post. This is my favorite strategy of yours. I am working to refine this, $/4% bo, IBD200, PEADS. I am making ant. my main focus in my 'NTRT' routine. I really appreciate all of your posts and would like to join membership and a bootcamp soon. I am currently just working on refining what you've already made public. I just wanted to say thank you.
Regards,
Stuart
Pradeep, can you expand on the smart force approach? I am using Marketsmith most likely in a brute force way, any tips would be appreciated ..thanks
Use a filter to narrow it down to around 100 or less stocks and then find good setup from it.
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