Tài liệu How To Use Volume And Technicals To Improve Reliability And Profitability Of Breakouts pdf

How To Use Volume And Technicals To Improve Reliability And Profitability Of Breakouts By Mark Boucher Investors following a strategy similar to the one I teach hereat TradingMarkets.co

How To Use Volume And Technicals To Improve Reliability And Profitability Of Breakouts

By Mark Boucher

Investors following a strategy similar to the one I teach hereat

TradingMarkets.com, as well as those who follow an O'Neil type strategy, are apt

to be buying breakouts to new highs frequently If you're going to be buying breakouts of four-week-plus flags or five-week-plus cup-and-handles, you need

to know all the variables that can help you improve the percentage of these trades that are profitable and/or can help you highlight stocks that have a higher likelihood of moving substantially higher following a breakout Fortunately, there are a number of technicals that can help a trader in this regard

This month, we'll cover five technical tools that our research shows help increase the reliability of a breakout moving in the intended direction By putting as many

of these as possible together, traders can substantially improve their odds of success in trading breakouts of any kind Here are the top five things we look for

on a breakout to help confirm that a substantial move is in the making (in order of importance):

1 Breakout day closes over pivot resistance and occurs on a

TBBLBG The most important variable is the price action made on the

day of a breakout TBBLBG stands for Thrust Breakout, Breakaway Lap,

or Breakaway Gap The day of the breakout (a new four-plus week high

in price) should make one of these three runaway price action patterns These patterns are described in my 10-week trading course For a quick review, a Thrust is a large-range day where the close is in the top third of the range which occurs on volume higher than the previous day A Lap

up is a day where today's low is greater than yesterday's close A Gap up

is a day where today's low is greater than yesterday's high (See Figure 1.)

Figure 1.

2 Breakout-day closes over pivot resistance and occurs on strong volume (20% over 50-day MA or near record volume since the

trading range began.) The second most important variable is the

volume action on the day of breakout You definitely want strong volume

on the day of the breakout to show significant demand is coming in

Demand volume at least 20% above the 50-day MA of volume on your breakouts and your odds will improve Strong volume can also be

defined as the very highest volume since the trading range started (See Figure 2.)

Figure 2.

3 Breakout is confirmed by a higher level of relative strength than occurred since the trading range began When a stock breaks out in price and also in its Relative Strength vs other stocks, it is much more likely to be a true market leader and is more likely to follow through (See Figure 3.)

Figure 3.

4 Prior to the breakout day, the trading range showed more

accumulation days than distribution days An accumulation day is a

day where prices rise on volume higher than the previous day A

distribution day is a day where prices fall on volume higher than the

previous day A strong stock will show more accumulation days than

distribution days during its trading-range consolidation prior to breakout The second chart of ACRT is an example If you count up-volume days that are more up vs up-volume days that are down, there are three more up-volume days that are up than down prior to the breakout day (See Figure 4.)

Figure 4.

5 One or more of four volume accumulation indexes breaks out to a new high (new high prior to trading range) before the breakout day

in price We use Money-Flow, OBV, William's Accumulation, and Volacc

as volume accumulation indexes (see Science of Trading Course) If you have access to any of these, check to see that your stock has at least one of these volume accumulation indicators breaking out to new highs ahead of price (See Figure 5.)

Figure 5.

The larger the number of these that confirm a breakout in price, the more likely that you've got a breakout that will move in the desired direction In addition,

most of the very strongest moves following breakout are accompanied by at least 3/5 of these characteristics

While these confirmation tools will help you trade any type of breakout, they work particularly well on high RS high EPS stocks breaking out to new highs, such as those we trade and those O'Neil trades So before you get too excited about a four-week-plus flag or cup-and-handle breakout in a strong RS and EPS stock in

a leading group, check these five features and be sure you have at least one of these in your favor, and preferably two or more

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