August 5, 2012
Uncategorized
By Geoff Bysshe
Here’s a pattern I like to use for finding profitable trading conditions for day trading and swing trading. It’s great pattern because it has both long-term and short-term potential. I’ll scan for these patterns even when the major indexes don’t have it specifically, but the QQQ is a perfect example right now so today is good time to point it out. See the pattern marked on the chart of the Q’s below.
The pattern is simply a breakout of a consolidation that has formed over more than 30 days. You can scan for these pattern developing, but in this article I’m focused on the stocks that broke out to a new 30-day high today. In some cases it may be more than a 30-day high.
The Q’s are a very nice example because the 30-day high level was very clearly defined my multiple daily highs over numerous swings peaking at the 65.30 area. It also closed nicely over the breakout level. The reason I like this pattern is because a good breakout of big consolidation areas can result in weeks of explosive trend days and flags that are great for day trading and swing trading.
The best patterns stay above the break out level on a closing basis once they have closed over the breakout level.
In the case of the Q’s I’ll look to buy an Opening Range reversal as a day trade if it pulls back on Monday and holds above the 65.30 level with a stop below the 65.30 level. As a swing trader I’ll do the same, and look for an opportunity to have a stop under Thursday’s high because that enables the gap to be filled without getting stopped out. I’ll also try to stay away from being long if it closes below 65.30.
The Q’s has the pattern but there are also quite a few stocks with similar versions of the pattern. You can see results of a scan below that look for stocks that had to have the high of the day break the 30-day high and also have the low of the day be within 4 averages ranges of the 30-day low. This is simple way to define a condition where the stock is at the upper end of a 30-day range yet not that far from the 30-day low. The result is a very broad definition of consolidation that is being broken which can find both closing breakouts and near misses to be watched.
In the HotScans image below I’ve highlighted in red the settings that make this scan work, and some of the stocks you may want to check out first. I highlighted DKS, DKS, MCHP, DTV, YUM, NUE, and IR, because they all have very interesting charts, but others on the list also have charts worth looking at. If you’re a HotScans member this link below will automatically pull up this scan any time you want it.
Saved scan: 30-day Breakouts
