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How to anticipate a breakout

Tuesday, March 4, 2014 6:07

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How can you daily find stocks like these?

Anticipating a breakout helps you get an early entry and can improve your per trade profit. It also can lower your risk.

Anticipation requires more pre planning and effort than buying a breakout. You need a process flow to do that.

While any stock can have breakout, what we are interested is in a stock that meets our setup criteria.

Some of these breakouts can be anticipated and for next couple of weeks we will focus on finding breakout and breakdown candidates pre b/o or b/d.

Breakout Anticipation using Momentum

The first step in anticipating a breakout is to focus on stocks with established momentum. There are many ways to rank stocks by momentum. Today I am highlighting just one of the ways to do this.

Our starting point for this is stocks that have gone up at least 80% from 52 week low. These are stocks that have established momentum. In Telechart you can scan for these easily.

c>1.8*minl252 and minv3.1>=100000

c= close today

minl252= lowest close in 252 days

minv3.1= minimum volume in last 3 days

The stocks meeting this scan conditions are proven horses. For whatever reason they are going up . And going up big. The scan allows you to narrow down the universe of around 6000 stocks to 500 stocks with established trend. These are the stocks favored by the market in last one year.

What we look for in these kind of stocks is a continuation pattern where they are likely to breakout.

First Shortlist

After running above scan and going through around 500 candidates in the scan. This is my first shortlist. This took around 20 minutes to do.

IEP

CCRN

MACK

ALIM

NUVA

LSCC

TNXP

HILL

UCTT

DRYS

CSII

SWFT

ICLD

FOE

GST

ONVO

PVG

LIOX

RGSE

KCG

HIMX

SHOR

DWRE

CRR

Six Best

From the above I have shortlisted these 6 as best candidates to watch for possible breakout.

FOE

SWFT

UCTT

KCG

CCRN

TNXP

DWRE

Putting Alerts in IB

The above 6 stocks I have put in to my watchlist on IB platform and put alerts for them for b/o. During the day as they start to breakout , one can enter quickly.

This is how I recently found and traded UA and GNRC. Both trade gave very early entry as they were breaking out.

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Source: http://stockbee.blogspot.com/2014/03/how-to-anticipate-breakout.html

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