Continuation breakout thread

[Nortorious]

Hi All,

I'm hoping to start a thread and will aim to maintain the content (post regularly) of stocks that have a continuation breakout.

My definition of a continuation breakout is a stock in an uptrend that has consolidated in a trading range and then breaks above the trading range (ideally as a new 12 month high) and with a supporting increase in volume to support the move.

Some examples of recent continuation trades I have taken CTD and API.

I will be adding content to the outstanding breakout thread for any stocks experiencing the initial breakout from the base trading range (following stabilisation after a downtrend). One such example NXR.

Hopefully have a few regular members contribute to the success of these threads and we can all enjoy the success together (no it isn't a club yet... Haha).

 

[tech/a]

Hi All,
I'm hoping to start a thread and will aim to maintain the content (post regularly) of stocks that have a continuation breakout.
Myt definition of a continuation breakout is a stock in an uptrend that has consolidated in a trading range and then breaks above the trading range (ideally as a new 12 month high) and with a supporting increase in volume to support the move.

Some examples of recent continuation trades I have taken CTD and API.

I will be adding content to the outstanding breakout thread for any stocks experiencing the initial breakout from the base trading range (following stabilisation after a downtrend). One such example NXR.

Hopefully have a few regular members contribute to the success of these threads and we can all enjoy the success together (no it isn't a club yet... Haha).

Are you intending to find stock prior to the continuation breakout and analyze what's happening in any consolidation with the view of getting on a trade?

OR

Wait for the breakout and as a condition preferably on volume.
In which case your intending to----just follow it?

OR

??

 

[tech/a]

This sort of thing?

Click to expand

 

[Nortorious]

Hi Tech/A and thanks for the post.

In answer to what I'm looking for, it is a little from column A and a little from column B.

So, looking at potential trades of stocks that are hitting the upper limit of their trading range OR have crossed the upper limit of the range on the intraday...

I think if we tracked all stocks in trading ranges it might not be effective but perhaps those that are showing signs of testing the upper limit and/or moving above it.... Does that make sense? Probably best to work off your experience on these things too as to what you see as being most effective and useful for us.

My intention is to be able to trade stocks we identify (based on my strategy) but also make others that follow similar entries aware of the opportunity. That way for stocks that don't come up in my scans, they might come up in others and vice versa.

Your FPH is probably a good example of the trading range developing but I would be looking for when it heads above that $5.00 with volume. Although, could potentially put in a buy-stop order above this range so the market takes me in when it moves that way....

 

[tech/a]

Your FPH is probably a good example of the trading range developing but I would be looking for when it heads above that $5.00 with volume. Although, could potentially put in a buy-stop order above this range so the market takes me in when it moves that way....

That's what I'd do but wouldn't care about volume on the break.
It's what volume does during and coming into a top and then consolidation
That we should bewatching

 

[Nortorious]

Thanks Tech/A.

So you don't consider volume on the crossing as important? Is this just from what you have seen in the market or you think the trading range volume says more than the one bar that makes the cross?

My theory would be that as the price crosses and volume is behind it, demand is thus seen as being higher and pushing prices up... Pretty basic economics principle I know but I like a KISS strategy.

 

[tech/a]

Thanks Tech/A.

So you don't consider volume on the crossing as important? Is this just from what you have seen in the market or you think the trading range volume says more than the one bar that makes the cross?

My theory would be that as the price crosses and volume is behind it, demand is thus seen as being higher and pushing prices up... Pretty basic economics principle I know but I like a KISS strategy.

Volume is simple but can be complex in text to a chart if you simply follow the "Text book" regurgitation that high volume indicates strength!
I don't disagree with your observation but I certainly wouldn't disregard price cross in resistance with very little volume.

I think it would be good to have an updated reasonably exhaustive volume tutorial on the "Introduction to Technical Analysis" thread. Will take sometime to do it properly.

In the meantime.

In UP TRENDS

High volume in an up trend indicates DEMAND
Range within a bar indicates SUPPLY
Close indicates STRENGTH of EITHER
Following Bars CONFIRM PAST price action and ANTICIPATE FUTURE PRICE ACTION

In DOWN TRENDS

High volume in a down trend indicates SUPPLY
Range within a bar indicates DEMAND
Close indicates STRENGTH of EITHER
Following Bars CONFIRM PAST price action and ANTICIPATE FUTURE PRICE ACTION

In UP or DOWN TRENDS
bars with very high volume generally anticipate price moves---it cannot be totally clear in ALL cases whether Very High Volume in itself supports the direction in which THAT bar has moved.
Other important factors need to be included.

FOR EXAMPLE

You have mentioned 1
A clear break of resistance/support is highly likely to be positive.
A stalling at or just above resistance/support is likely to be the exact opposite.

Not ALL HIGH VOLUME is equal!

This is my favorite topic and I think best supported with chart examples that everyone can look for and interpret IN CONTEXT with their trading.
This will take sometime---in fact a book would do it justice. While Ive read many on the topic I really do think that most fall sadly short!

Lets use the chart I've tossed up for discussion as a VERY GOOD example.

CLICK TO EXPAND



EXAMPLE 1



EXAMPLE 2



Take sometime to pull up a chart and see what the VOLUME/RANGE/and CLOSE was telling you from the HIGH VOLUME BARS to the BREAKOUTS?
Quite a story!

 

[Nortorious]

So tech/a you would be expecting the stock to continue heading upwards?

My confidence level in it heading north is probably not high enough to warrant trading it. If I was already in then it wouldn't matter so much, only when it starts to curve over and flatten out.

I look forward to hearing more on your thoughts with the matter of volume etc.

Here's a trade opportunity I see for tomorrow and the weeks ahead with the continuation breakout I look for. As this chart below shows, has closed above $5.80 on last weekly bar at $5.88. Rsi increasing, and moving average trending upwards (and price is above it). We'll see where it goes...

 

[tech/a]

This is as good a setup as any.

So Your trading this then in the weekly timeframe?

RSI and M/A's are simply tracking a bullish price action.
They have very little technically supportive usefulness---in my view.
They cant do anything else but support the clear price action.
To consider them as a confirmation that all is OK is pointless.

How would you set up your trade?

As Id expect this to be traded differently on a weekly basis to a daily basis---interested in how you'd handle it.

Position Sizing
Risk mitigation.

What is your exit strategy.

The DAILY by the way shows a really nice Bullish Micro pattern with a wonderful accumulation
bar in it.

 

[VSntchr]

Don't follow this type of trading strategy, but I noticed FPH which is a competitor to a stock I do hold: RMD.

Just had a look at the chart of RMD and noticed that today it broke resistance...perhaps it is a candidate also?

(this chart is on EOD data)4

 

[Nortorious]

This is as good a setup as any.

So Your trading this then in the weekly timeframe?

RSI and M/A's are simply tracking a bullish price action.
They have very little technically supportive usefulness---in my view.
They cant do anything else but support the clear price action.
To consider them as a confirmation that all is OK is pointless.

How would you set up your trade?

As Id expect this to be traded differently on a weekly basis to a daily basis---interested in how you'd handle it.

Position Sizing
Risk mitigation.

What is your exit strategy.

The DAILY by the way shows a really nice Bullish Micro pattern with a wonderful accumulation
bar in it.

Yeh that's right Tech/A, I'm working off the weekly charts and this does impact risk and also the way I trade it.

So regarding position sizing, I allocate a certain percentage of overall capital of my portfolio (obviously needs to be an amount that is in cash at the time), usually stick with a standard 10% on most stocks and less if more of a speccy stock. Basically, I size my position to ensure the overall portfolio risk doesn't exceed 3% but ideally I want it less than 2% if possible without making the position too small.

The risk mitigation (which I work into position sizing to determine the risk in the trade) is basically my ideal entry price minus the stop loss point that I identify. To find the stop loss point, I look at the moving average and the last point that the prior trading range and the bar the last bar that hit the bottom of this range. I then go straight below to the MA and look at the price at that section of the chart. Then, depending on the number, I place it below this point (subjectively) to give a little extra wiggle room.

My exit strategy consists of me tracking the progress of the stock and adjusting the trailing stop at points that become clear (whether it be trading ranges forming or shake out bars) and moving it as necessary. Once the stock starts to curve over, I will see the price hit the moving average and once this is penetrated, move my stock to below that bar. Sometimes the stock will head back up and I repeat the process until the trailing stop gets hit. Other times it may go sideways and eventually fall through the stop point and I'm out.... STILL REFINING THIS METHOD.

Whilst daily movement can not always be positive (such as today), I stick to the game plan and play the probabilities.... It's working for other stocks I hold so just a numbers game ultimately.....

Interested on your thoughts on the above methods.

 

[Nortorious]

Don't follow this type of trading strategy, but I noticed FPH which is a competitor to a stock I do hold: RMD.

Just had a look at the chart of RMD and noticed that today it broke resistance...perhaps it is a candidate also?

(this chart is on EOD data)4View attachment 60117

RMD looks ok but I personally would want to see it move above $6 with a bit more volume behind it...

 

[Nortorious]

HSN was a perfect example of a continuation breakout this morning. I unfortunately couldn't take the trade as I was in meetings all morning and hadn't put a conditional order in last night. Once it got above $1.60 it was off and running

 

[tech/a]

HSN was a perfect example of a continuation breakout this morning. I unfortunately couldn't take the trade as I was in meetings all morning and hadn't put a conditional order in last night. Once it got above $1.60 it was off and running

They are all brilliant in hindsight.
If you had 20 on conditional orders few if any would be triggered.

 

[Nortorious]

They are all brilliant in hindsight.
If you had 20 on conditional orders few if any would be triggered.

Agreed hindsight makes trading look simple (and unfortunately that's how many "make you rich overnight" systems are sold).

In most instances, I am able to trade the market at in this situation would buy at market as soon as I saw that it had jumped above the previous trading range. An example is my trade with CTD, bought at market at $8.23 and currently at $9.80 (and still looking good for further advancement).

When I know that I can't trade ahead of time, I will put conditional orders in. Sometimes they are hit, other times they aren't... Unfortunately for me, in terms of taking the trade, I was called into a meeting right on the open and it cost me the desired trade entry. It's important for me to take care of business for my primary means of income first...

Trading for me is an opportunity to bring in a second stream of income and fortunately the meeting for me was to discuss future opportunities with my organisation and becoming a part owner down the track.

That will see my opportunity to further progress my wealth creation journey and means the possibility to generate three streams of income: pay cheque (and bonuses), trading returns and dividends and dividends from being a part owner of a profitable business and proven business model.

 

[Nortorious]

New breakout opportunity presented today. ALU moved above the previous range where the high was $3.14. I got into the trade this morning with an at market purchase at $3.15.

Following the entry, the stock moved to a intraday high of $3.24 and closed at $3.17 showing a small profit for the first session of the holding.

Trading off the weekly chart but took the entry using the daily. Weekly chart below shows the overall activity and the stop will sit around $2.68 for now.

Weekly chart


Daily chart


Initial target is $4.00 from past action way back in 2001 and if it moves through this area, will be watching it again at $4.48ish.

We'll see what happens...

 

[Boggo]

...
Trading off the weekly chart but took the entry using the daily. Weekly chart below shows the overall activity and the stop will sit around $2.68 for now.

Using a relatively similiar approach to yours in my SMSF.
I narrow the market down to around 480 stocks using StockDoctor.

Have had around 12 transactions (entries/stops) this FY, currently running double digit profits without taking dividends into account (including >15% yield on TLS by using instalment warrants).

The main advantage I have noticed is that you need to narrow the tradeable market down a bit by eliminating the wannabees (I use StockDoctor for this) and then apply a weekly scan to the remainder will throw up reliable entries such as CAJ, IFM, TNE etc.
If you are up to it you can also apply leverage on some of the majors using warrants etc.

Remove some of the chaff from the existing 2000 or so stocks and you will find that you may be on the right track and your failed trades will also reduce significantly.

I haven`t traded ALU but the chart is below as an example what you can do with seven transactions to maintain a position in the trend.

(PS. bear in mind that I am an amateur at this and what works for me may not work for you)

(click to expand)

 

[VSntchr]

Using a relatively similiar approach to yours in my SMSF.
I narrow the market down to around 480 stocks using StockDoctor.

Hi Boggo,
Your approach is interesting and I always have a look at the weekly charts you throw up now and again.
I think a strategy such as this would be suitable for my father. Low maintenance and he can't get himself in too much risk like he has in the past with several option strategies

Just wondering: are those signals automated by software, or are you simply entering once a string of red bars turns to a green....and selling when a red bar occurs?

 

[Boggo]

Just wondering: are those signals automated by software, or are you simply entering once a string of red bars turns to a green....and selling when a red bar occurs?

They are generated by the software. The scan of the shortened list identifies any stocks that have just created a signal.

The entries and exits don't always occur on the bar following the signals, they are usually just a heads up. The exit is usually a result of observing daily and weekly stock behaviour but is often within a bar or so of the signal.

 

[>Apocalypto<]

They are generated by the software. The scan of the shortened list identifies any stocks that have just created a signal.

The entries and exits don't always occur on the bar following the signals, they are usually just a heads up. The exit is usually a result of observing daily and weekly stock behaviour but is often within a bar or so of the signal.

Boggo,

how does that method handle slower markets? I know it would suffer in ranges. Do you have a criteria for keeping yourself out or damaging market behavior? Looks very nice.