Lasertrader's Place

A Potpourri Of Trade Ideas and Setups

How to find good setups before 4% breakouts by Lasertrader

Posted by lasertrader on December 19, 2010

I have the ultimate respect for Stockbee and his service. I have learned more from him to give me an edge than any other “mentor” in all the years I have been trading. Here is a copy of a post I made in his private subscription blog that has been made permanent in his Trading Guide. If you haven’t heard of Stockbee, you should check out his free blog and consider subscribing to his service. Its not a stock picking service. He teaches you how to do it yourself. You need to make a commitment to change if you want to profit from his teachings.

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How I get the jump on getting into stocks that end up in the Stockbee Trend intensity Scans.

I thought I would share my methods on how I get into stocks earlier that end up in the Stockbee Trend Intensity Breakout list. As an example I will use BRKR which showed up on last night’s Trend Intensity video. If you look at my twitter stream you will see that I tweeted that out on Saturday and was able to enter it yesterday at 15.58. There is no doubt that the stocks that end up in the Trend Intensity scan can run for 2 to 3 days but with Telechart delayed scans and scanning intraday, the stock has already run 4% by the time you see it and by the time you put the buy order in it often has run a lot more.

Stockbee has trained us to quickly recognize chart patterns that lead to good moves. Contrary to what is discussed here, Dan Zanger only uses the $1 move strategy for intraday scalping. The way he makes his money is scanning a list of charts each night looking for specific patterns, deciding on buy points and during the day when the buy point is hit and the pattern is playing out he checks volume and buys if volume is supporting the pattern play. This takes some elbow grease but if you are willing to do it you can get into the Trend Intensity plays 4% or more earlier than the Telechart scans will get you in.

To do this I go through this process. Each weekend I load the following lists into Telechart.

From Bluefin: Post Earnings Surprise, Sector 50, Emerging 50, Short 25 From IBD; IBD100 and a list of “New America” stocks that I manually keep updated.

The key to this strategy is having the best list of stocks that are strongest in the stronger sectors. Thats how Bluefin and these lists come into play. There is a lot of overlap in these lists but thats fine with me.

I then visually click through the lists looking at the charts. As Stockbee says, after you do this enough, you can recognize a good setup pattern in less than a second. Since you know what setups can create powerful moves, you can see potential breakouts before they occur. Here is the BRKR chart after the fact  BRKR came from the IBD 100 list.

On Saturday I saw the long horizontal consolidation and in Freestockcharts I drew the trendline across the highs of that consolidation. Then I put an alert on that line so that if price crossed it I would be told by Freestockcharts that a breakout is occurring. After I got the alert, I quickly look at volume and volume buzz to see if there is very good volume supporting the breakout and if so I push the buy button.

Another example was ZUMZ that I got off the Sector 50 list with the trendline I drew and alerted. I got the alert, checked volume and bought right away. Here is the ZUMZ alerted line I had set up.

Scanning all the charts and setting up the alerts takes me about 30 minutes. Then each day I all I do is sit there and wait for Freestockcharts to tell me what is breaking out and what I should trade. These alerts were set over the weekend and they may not have triggered on Monday, it may have been a few days or maybe even never that they trigger but they are all “probable” setups that I have Freestockcharts monitoring for me. I have nothing to do all day other that wait for alerts to trigger then to quickly decide if I want to get in the trade. I play a few more defined patterns than are discussed here but horizontal consolidations and flag pullbacks are the most profitable. Again, the key is to have the right list of “Trend Intensity” strong stocks as your basis.

I know this is more of an elbow grease method but in reality it takes an hour or so on the weekend to set up the lists and do the first review setting alerts and then each night it takes about 30 minutes. The end result for me is that I get in sooner and grab even a good portion of the first 4% move.

Thought I would share how my day to day plan goes. My work is done at night then I wait for Freestockcharts to tell me what to trade each day.

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9 Responses to “How to find good setups before 4% breakouts by Lasertrader”

  1. Khoi said

    Thanks for a great article lasertrader!!! You always share and give back to trading community.

  2. Pradeep said

    Thanks.

    Good to see you blogging.

  3. John said

    Thank you for the very nice article on how you get into a stock. What triggers do you use to get out? Are you just selling at the top of those one day breakout moves?

    • Hi John..sorry for the delay.

      I am always adjusting my plan to meet the big picture of the market. I use SPX daily and 60 minute charts to determine what kind of a trend we are in. If the market is going sideways like it has been lately I take profits quickly and often the same day if I got a good move out of them. When we are trending I prefer to hold longer and see how the move proceeds.

      There are many ways to determine an exit point. The primary is at the next highest resistance point. If there is no resistance close overhead I may use a measured move technique based on what the pattern the stock was in. Or I may use a 20/50/200 moving average. I am sorry I’m not more specific. I like to look at each chart on its own to see what the characteristics are. Maybe the last time a stock consolidated sideways it broke out and moved up 8% before forming the next consolidation. If thats the case I may look at that as my target.

      I am a shorter term trader and often take large consolidated positions up from taking advantage of my intraday buying power. Thus, if I take a position 3 times what I wuld normally hold overnight for a swing and I get 3% or 4% immediately thats equivalent to getting 9% to 12% on a multi-day swing so I will take the profit immediately. If it moves smal but looks good I may reduce the position and sell 2/3 to turn it into an overnight swing.

      I hope some of these ideas help

      • John said

        Yes, thank you very much. Those ideas do help.

        I don’t worry too much about entry points. There is a ton of info in books and on the internet for that. I do, however, become very anxious over exit points and have been trying to come up with a process to remove some of that anxiety.

        It sounds like I’m a longer term trader than you, though. I’m trading in a taxable account and like to ride a stock up as long as I can, hoping that it doesn’t fall off of a cliff before one year is up. I’m starting to feel like this is a novice thing to do and/or wishful thinking.

  4. […] my trades by anticipating breakouts on stocks with high momentum. You can read his entire post on his site. It is also part of the Stockbee Trading Guide […]

  5. sodhan said

    Consolidation is tight spring unwinds so fast you do not get time to press button unless buy order at some set price is fed in the computer.Filtering false breakouts is a necessity esp in Indian market i am not aware of your market.So best is let the upthrust run and then catch the first retracement.No retracement then more deep study is requiired.

  6. Subhaga said

    Very interesting. Do you collect the watch list items only on weekends or do you keep updating the list items throughout the week? When you see alert in the morning what is the volume and volume buzz level you’re looking for?

  7. Sorry for the late reply. I have found that I only need to update my lists once a week to have far more setups than I could handle each day. That’s the challenge. If I have too many alerts I will write on a piece of paper several of the alerts I feel are the best quality so I can prioritize them when several go off at the same time right after the open. The prioritization comes from just my general knowledge of what sectors are the strongest at any given time.

    Volume Buzz is a real-time measurement of intraday volume at a given point of time in a day as it relates to a 50 day average of normal volume to that time of day. A volume buzz of zero means that volume is running average intraday. A volume buzz of 100% means that volume is running at double normal intraday. Its good to see it at 50% or more.

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