Trading Gaps and Breakouts (Stocks)
- Thread starter Brandonf
- Start date
One thing I hope you start to see is that the idea's I'm using are pretty much the same across the board, and very simple. Thats how traders trade and make money. With simple systems that work, and they follow them over and over again. FAST was in a clear downtrend and one of the days weakest names. It did not retrace with the rest of the market, but instead continued to base at its lows. It was one of the weakest shares in the Nasdaq100. This brought it to my attention for shorting.
Brandon
You can see here that GILD had a small gap up at the open. There is a very strong tendancy for these type of small gaps to fill in. When they do not it is really sending a signal to you that the stock has a lot of underlying strength. Once you have indentified that then you have to wait for your setup to occur, which will be either a bullflag or a base in the case of a gap up. You can see on this fifteen minute chart of GILD that it had a nearly "picture perfect" base near the highs for a period of a bit over an hour. This gives the stock a chance to catch its breath so to speak after a strong directional move, and allows it to resume that move on a breakout.
Brandon
Brandon
[11:53] <brandon> This is a chart of the only stock I have alerted so far today
[11:53] <brandon> PLCE
[11:53] <brandon> please let me know when you have it up
[11:54] <brandon> Each morning before the market opens
[11:55] <brandon> you should be making a list of stocks gapping up and down
[11:55] <brandon> look for traps
[11:55] <brandon> for gaps down to support
[11:55] <brandon> gaps up to resistence
[11:55] <brandon> large gaps
[11:55] <brandon> and have these written down
[11:55] <brandon> and this will nearly always give you at least one or two trades to take in the morning
[11:55] <brandon> and generally speaking
[11:56] <brandon> you can make a very nice living just off of these trades if this would be what you choose to specialize in
[11:56] <brandon> what we have here in PLCE is pretty much of a classical breakout setup
[11:56] <brandon> in the morning we have a very large gap in PLCE
[11:56] <brandon> when you see the gap
[11:56] <brandon> this one was not to any real key area's of resistence
[11:56] <brandon> so its not one you will look to short
[11:57] <brandon> so now you want to watch with the idea that the gap will fill
[11:57] <brandon> but there is not really a setup for you to take in that direction
[11:57] <brandon> if it fills the stock does not interest you
[11:57] <brandon> but
[11:57] <brandon> if it manages to hold up
[11:57] <brandon> this is a sign of a lot of strength[11:57] <brandon> because it should go down, and if something should go down, it better go down or its is going to go up
[11:57] <brandon> this is a key issue in the market
[11:57] <brandon> now since nothing moves in a straight line
[11:57] <brandon> you need to see a setup
[11:58] <brandon> because you are not wanting to see the gap filling
[11:58] <brandon> you are basically left with a base
[11:58] <brandon> you want to see a period of sideways movement
[11:58] <brandon> you can see here that we got just that in plce
[11:58] <brandon> it based sideways nicely for about 15 minutes
[11:58] <brandon> and when it breaks
[11:58] <brandon> you want to be on board
[11:59] <brandon> becuase generally there are very sharp moves
[11:59] <brandon> and if it does not move
[11:59] <brandon> you can get out with minimal damage
We entered RSAS on the breakout above $8.10 and took profits between $8.50 and $8.55.
Here is the trade explained in chat.
[11:23] <brandon> here is the 2 minute chart of rsas
[11:23] <brandon> I always love it when people say that breakouts don't work
[11:23] <brandon> I hear it all the time
[11:23] <brandon> especially on message boards
[11:23] <brandon> and the funny thing is that the more I show that they do work
[11:24] <brandon> the more convinced some of these people become that Im just cherry picking my very best ones for show
[11:24] <brandon> but anyway
[11:24] <brandon> here we have another perefect example of a breakout setup that will work consistantly
[11:24] <brandon> I will say that trading breakouts like you would have from about 1997 to early 2000
[11:24] <brandon> it will kill you
[11:24] <brandon> you can't just trade every breakout like you could then
[11:25] <brandon> each morning I want all of you to be scanning the market
[11:25] <brandon> and as you are scanning
[11:25] <brandon> look for stocks that are gapping up significantly
[11:25] <brandon> these stocks have a lot of emotion tied up in them
[11:25] <brandon> large gaps have more of a tendancy to not fill then regular gaps
[11:25] <brandon> but that doesnt mean they wont
[11:25] <brandon> so when you have your list made
[11:25] <brandon> keep an eye on the stock
[11:26] <brandon> what you want to see is strength right away
[11:26] <brandon> a bit of a move up right off the gap up
[11:26] <brandon> and then a sideways base
[11:26] <brandon> nothing moves in a straight line
[11:26] <brandon> so this small base allows the market to rest
[11:26] <brandon> and once it has done that
[11:26] <brandon> you can start to get in
[11:26] <brandon> but the base is critical
[11:26] <brandon> and the move up off the gap puts the odds more in your favor too
[11:26] <brandon> you want all kinds of things to show you strength
[11:27] <brandon> I was talking to a member yesterday who has been with us for some time
[11:27] <brandon> and she is now making these gaps and breakouts her focus
[11:27] <brandon> and she had her best day ever
[11:27] <brandon> so its a great setup
[11:27] <brandon> and if you just focus on this
[11:27] <brandon> nothing else
[11:27] <brandon> you will get to know it very well
[11:27] <brandon> and you will support yourself and your family very well
[11:27] <brandon> I would encourage all of you
[11:28] <brandon> especially new traders
[11:28] <brandon> and those of you breaking even
[11:28] <brandon> to focus on one setup
[11:28] <brandon> be that Oops
[11:28] <brandon> be that gaps
[11:28] <brandon> bullflags
[11:28] <brandon> bearflags
[11:28] <brandon> phoenix
[11:28] <brandon> avalanche
[11:28] <brandon> we have a number of them you can choose from
[11:28] <brandon> or some of your own observations
[11:28] <brandon> Im working with another trader who is starting to turn things around by focusing on double tops only as that is a great setup for her
[11:28] <brandon> she does very well with it
[11:28] <brandon> but the point is to focus on one thing
[11:29] <brandon> major in it
[11:29] <brandon> its like going to college
[11:29] <brandon> if you really want to do something with yourself
[11:29] <brandon> you dont major in general studies
[11:29] <brandon> you find something that will have a purpose
[11:29] <brandon> you learn a very specific skill set
[11:29] <brandon> a core of knowledge that you can apply very well as a specialist
[11:29] <brandon> and trading is exactly the same
[11:29] <brandon> find one thing
[11:29] <brandon> work with it
[11:30] <brandon> once you know just about everything in this one setup
[11:30] <brandon> and this will take 6 to 9 months
[11:30] <brandon> then start to branch out
[11:30] <brandon> add some more weapons to your arsanel
[11:30] <brandon> but to become profitable
[11:30] <brandon> learn one thing
[11:30] <brandon> do it will
[11:30] <brandon> Doug Zalesky from Elocal has a great anology
[11:30] <brandon> when he says be a brick layer
[11:31] <brandon> brick layers show up every day and do the same thing
[11:31] <brandon> they dont try to be fancy
[11:31] <brandon> and it works
[11:31] <brandon> it works in trading too
This week has been pretty slow, probably the lead up to the holiday. Today has definatly been the most active of the week.
Had a nice trade in SNDK early in the day, but I was a piker and made 35 cents. Coulda woulda shoulda
LEXR also gave a nice scalp. Ive stoped out on a YM short and on a GM short. One trade though that I want to show is the long that I had in UHS because it really presents a perfect chart example of a synergy in timeframes.
[10:34] <brandon> the top chart on here is the daily chart
[10:34] <brandon> you can see that over the last two days there has been real strong selling in UHS
[10:34] <brandon> yesterday had good volume and it opened at the days high and closed on its low
[10:34] <brandon> it had range and volume expansion
[10:34] <brandon> this tells us a lot of people are getting out
[10:35] <brandon> probably a good number getting short as well
[10:35] <brandon> on todays open
[10:35] <brandon> we have a very large gap up
[10:35] <brandon> almost above yesterdays high
[10:35] <brandon> but not quiet
[10:35] <brandon> the gap holds which is a signal of strength
[10:35] <brandon> and then it bases sideways for some time
[10:35] <brandon> which gives it a chance to rest
[10:35] <brandon> it gapped up a lot
[10:35] <brandon> that takes a ton of energy to do
[10:36] <brandon> so think of running a marathon
[10:36] <brandon> you wont win another one if you run it back to back
[10:36] <brandon> it has to rest
[10:36] <brandon> so the rest occurs by this sideways action
[10:36] <brandon> this also gives us a great synergy
[10:36] <brandon> coz the base is occuring right under yesterdays HOD
[10:36] <brandon> so when it does break
[10:37] <brandon> you have the force of two setups to move it
[10:37] <brandon> todays intraday gap and hold
[10:37] <brandon> and the daily trap
[10:37] <brandon> so lots going for it
Brandon
Had a nice trade in SNDK early in the day, but I was a piker and made 35 cents. Coulda woulda shoulda
LEXR also gave a nice scalp. Ive stoped out on a YM short and on a GM short. One trade though that I want to show is the long that I had in UHS because it really presents a perfect chart example of a synergy in timeframes.
[10:34] <brandon> the top chart on here is the daily chart
[10:34] <brandon> you can see that over the last two days there has been real strong selling in UHS
[10:34] <brandon> yesterday had good volume and it opened at the days high and closed on its low
[10:34] <brandon> it had range and volume expansion
[10:34] <brandon> this tells us a lot of people are getting out
[10:35] <brandon> probably a good number getting short as well
[10:35] <brandon> on todays open
[10:35] <brandon> we have a very large gap up
[10:35] <brandon> almost above yesterdays high
[10:35] <brandon> but not quiet
[10:35] <brandon> the gap holds which is a signal of strength
[10:35] <brandon> and then it bases sideways for some time
[10:35] <brandon> which gives it a chance to rest
[10:35] <brandon> it gapped up a lot
[10:35] <brandon> that takes a ton of energy to do
[10:36] <brandon> so think of running a marathon
[10:36] <brandon> you wont win another one if you run it back to back
[10:36] <brandon> it has to rest
[10:36] <brandon> so the rest occurs by this sideways action
[10:36] <brandon> this also gives us a great synergy
[10:36] <brandon> coz the base is occuring right under yesterdays HOD
[10:36] <brandon> so when it does break
[10:37] <brandon> you have the force of two setups to move it
[10:37] <brandon> todays intraday gap and hold
[10:37] <brandon> and the daily trap
[10:37] <brandon> so lots going for it
Brandon