How do stocks move
Stocks may not move for weeks or months but when they move they move in momentum bursts.
Seldom do they move in slow steady manner. They move in explosive moves of 3 to 5 days.
The move in this stock illustrates this very well. It had series of big burst moves. Bulk of the gains happened in those 3 to 5 day bursts.
Mark Boucher in his book The Hedge Fund Edge has one of the best description of this phenomenon and how to trade it for swing moves.
Boucher found that stocks exhibiting momentum burst kinds of volume and momentum patterns in first 21 days of their move have very high probability of making the meteoric move over long period.
He calls the momentum burst pattern tbblbg.
tbblbg stands for Thrust Breakout, Breakout lap , and breakout gap. His methods involved counting the number of tbblbg is first 21 days and then focusing on stocks with 5 plus tbblbg. Essentially he found stocks that bust out with momentum burst in their first 21 days tend to go up similarly over long period.
He called such moves runaway moves. tbblbg is cased by aggressive buying.
tbblbg is basically another way to say range expansion.
Momentum stocks exhibit such runaway characteristics . They are created by waves of buying followed by periods of inactivity or consolidation.
Key things to understand:
Stocks move in momentum bursts of 3 to 5 days
These momentum burst moves can be of 8 to 40% magnitude
After the burst stock may end up giving up all that gains or going sideways for extended period of time
Sometime a trigger event or catalyst might set off this momentum burst. But in bull market that is not necessary. Just the momentum of market can lead to such moves.
Two possible strategies for swing traders to benefit from this phenomenon: enter in anticipation of breakout or enter on day of breakout
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