Trading Breakouts

Discussion in 'Trading' started by Yoda, Jul 12, 2001.

  1. Intraday Breaks, as i trade em =)

    my main strategy is trading intraday breaks.. this is what im looking for..

    stocks between 5 and 40 dollars with at least 500k shares avg daily volume..

    1.) Stock must be up or down a minimum of 50 cents on the day.
    2.) I check 15 min and 60 min charts to make sure stock is free of support/ resistance nearby in the direction of break..
    3.) I am looking for stocks that are in the process of making either a cup and handle or a head and shoulder pattern..

    Cup w/ Handle Breakdown..
    take a look at a 2 minuite chart of YHOO 7/12/01

    can you see the upside down cup and handle pattern starting shortly after the open and completing about 10:35?

    i shorted yhoo at 10:27 at a price of 18.13.. my stop goes just over the previous support which is 18.30 in this case.. it is not uncommon for an issue as thick as YHOO to have trouble pushing through a whole number.. normally, thick stocks will break a level and then pull back thru it once or twice before resuming its trend.. thinner stocks rarely pull back thru support although they will often come back up to test that level before making a significant move in the direction of the trend..

    as you can see, yhoo made a small break and then wiggled around 18 for about 40 minuites.. then it finally fell about 11:15 and i covered at a price of 17.76 for a +.37 cent scalp..

    Head and Shouler Breakdown..
    take a look at a 2 minuite chart of FLEX on 7/11/01..

    notice the head and shoulder pattern that formed between 9:48 and 10:32..

    with this pattern what i do is wait for a bar or two of the right shoulder to form and then short it there with a stop over the top of the head, or if that is too far away, the stop can go about 15 cents or so over the high of the first few bars of the right shoulder..

    of course, the potential of this trade is easy to see.. too bad i missed it =)

    it seems that cup breakdown patterns are created when a stock makes a low and then retests that low, bounces just a little and then tests again and finally breaks.. what seems to happen with head and shoulder patterns, is alot of people buy the first retest thinking its a double bottom pattern.. the stock goes up a bit, falls back, gets a small bounce and then breaks..

    be careful of stocks that make a quick move to the support area and bounce.. ideally the third retest will be a very slow methodical type of selling, often with significant buying pushing against the stock as it ticks down.. remember your stop and dont panic out just because you see buying, otherwise you will get shaken alot on this pattern.. another thing to be wary of is a V shaped cup or head.. what you want to see is a nice rounded pattern.. normally, its better if the top of the cup or head is against the intraday 38% fib line.. of course, it goes without saying that its best to trade in the direction of the market..

    i normally take at least 1/2 profits after the initial plunge.. with the low volume and tight ranges that the Naz has given us lately, i am more confident in scalps..

    one last thing.. sometimes, a stock will make a plunge, down 15 or 20 cents.. and then get massive buying that pushes the stock straight back thru the old support level.. if this happens, i consider the setup failed and exit immediately..

    hope this is useful =)


    Disclaimer: The ideas and opinions expressed in this post are not advice to buy or sell anything.. while this setup has proven useful for me, no one can gurantee that it will work for you.. consult a qualified investment planner before buying or selling securities..

    hehe, ive always wanted to say that..

    #21     Jul 13, 2001
  2. dozu888


    To answer Yoda's question, the key is the low-volatility pockets before the break out.. if you see a stock makes new intraday hi/lo, look at the chart, did it have a consolidation zone right before the break? (chance for set up a low risk trade) or it already moved in the same direction for several candles in a row and finally made the new hi/lo ? (already extented, hard to define low risk, avoid)

    Of course all patterns will fail once in a while, the key is to lose little when you are wrong.
    #22     Jul 13, 2001
  3. My trading strategy is to trade breakouts and short braekdowns. I can't get myself to buy off support - lol. I like stocks that are trending up. Trick now though is to only buy stocks that are in hot sectors. That means ignoring the Nasdaq tech bubbles and buying things that are not so so sexy like Autozone, car dealerships, and health products company. They are what is how now. If you just play techs you'll get into false breakout after false breakout because the big money is still selling them.
    #23     Jul 13, 2001
  4. Yoda


    Thank you all who took time to reply.
    Trading breakouts / breakdowns seems to be a very controversial issue. Some love it, some hate it. But so probably anything else...
    For some reason I think the set up you buy and short breakthroughs off could make a world of difference. To make sure you're facing the least overhead when you go long and vice versa. Also proper timing within general market.

    Thanks again guys,
    Best Wishes,
    #24     Jul 13, 2001
  5. huby


    Question for:


    I've been trying for several days to access the "Great new pattern" live chatroom on yahoo. I signed up and can see the messages posted but no matter what time of day I go to the site it says "0 members online now". Are you still using this room? If so I must be doing something wrong. I'm very intrigued by your posts. You seem to have a very unique approach to trading and I'd like to learn more about what you do. Thanks.

    #25     Jul 13, 2001
  6. Huby,

    If it says "Online Now (0 members)" under the Overview section. Go over to the right of that and click on "view all online" That will show you members of this club who are logged on to Yahoo at the moment. But to get into the chat room. You need to click "enter" under the chat room section, that's where everybody is during market hours.

    Hope this helps you
    #26     Jul 14, 2001
  7. #27     Jul 14, 2001