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4 Tips For Trading Breakouts SMARTER

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So in a lot of these article as well as a lot of trading, you’re gonna hear talking about focusing on one year highs or what we call on the trading community, 52 week guys, okay? I’m going to break down the four things that I think you need to look for. You can’t buy every breakout but if you focus on these four, your odds of success are much higher.

So as I mentioned, I’m gonna go over the four core things I want you to look for when you’re looking at buying these breakouts, okay?

The simple fact is, stock market literally hit all time highs again today, looking like it’s gonna keep pushing into the end of the month, end of the year. Looks like it’s going to continue next week. So you’re going to see a lot of 52 weeks scans, lot of stocks showing up on that one year high but you got to get that list down to a manageable amount. That’s what I’m gonna talk about today.

Biggest thing I want you to focus on, especially if you are a new or a part time trader is earnings season, okay?

Earnings Winners

Earnings winners, that’s one of the highest probability set ups you can see out there and a lot of people a lot of new traders are like, well, I don’t wanna only trade earnings season but I think a lot of them don’t break it down the way I do.

I mean the simple fact is earning season happens four times a year. It’s roughly six weeks long, where all the companies high price and low price are announcing those earnings, okay?

Do the math, that is four times six, that’s 24 weeks a year. Basically, half the year is earning season. And if you’re a part time trader, if you’ve got a job, if you’ve got a family, if you got school, maybe you got all three of them, maybe you got two jobs, you can’t trade every single day and you shouldn’t be, especially if you’re under the PDT.

But if you can dial in on earning season and be as focused as possible around your schedule, I think the odds if you grow in your account are exponentially higher. So that’s the number one thing I want you to look for. When you see a stock that you’re interested in, hitting that 52 scan, see if they’ve had earnings in the last few days. That’s number one.

Second thing I want you to look at is listen, there’s there’s thousands and thousands and thousands of stocks out there.

What we’re looking for, for these multi day or multi week, hopefully multi month moves are stocks that are considered quality. The one of the first things you want to look at is, and this is built into stocks to trade, we have a statistics tab that gives you all this information.

Do they actually have sales?

Now, I want to be clear, your first thought might be, Well, hey, we day trade these junk stocks that are losing money all the time. But what I’m trying to do is get you a list of good breakout stocks.

And if I’m looking and many people will be like, well I tried buying breakouts, none of them work. They’re probably trying trade money losing crap stocks, with no sales. So that’s one of the way to get this down to a manageable list. So look at that. Do they have actual sales?

You’d be surprised how many low priced stocks have zero sales. On top of that, do they at least have okay cash flow? Are they positive? Or are they at least not losing 100 million dollars a year. So that’s a great way to quickly say, here is five stocks that are at the 52 week high that are up on earnings, give me the profitable ones, give me the one with real sales because if you got real sales, that mean you have a product.

Don’t forget in Penny stock land, a lot of these companies don’t even have a product. If you called them up, and said ” I want to give you money,” They would be like, ” I don’t have anything to sell you, we are strictly a pipe dream company.”

So I think that’s the second great way to get that list down to a manageable size.

Third thing, volume, volume, volume

So there is hundreds, thousands of indicators out there, but number one, only price action matters, only price pays as the old saying and number two, so close, second to price is volume. Avoid low volume breakouts at all costs.

If you are buying a break out, you are trying to find that stock that hit that level, its gonna continue the next day, continue the next day and so on. If there isn’t interest, volume is a function of interest. Remember the stock market ultimately is based on supply and demand, basic economics.

It is really at the core, that is the stock market. If there isn’t demand, building demand, what’s the odds of that product raising the price? And its just like that with the stock market. Look for unusual volume, the way I do with that, again is built in the stocks to trade, I track the 60 day average volume, that’s the average trading volume over the previous 60 days.

I want to see double, triple, quadruple, ten times that number if I am looking to buy a breakout.

Fourth and last thing is, look at hot sectors.

There is gonna be in the heat of earning season, a lot of days we might have 500 stocks announcing earning, you can’t trade 500, you can’t even research 500. Use the screeners in stocks to trade, to whittle this down and look for sector, volume, you know, price level, price change etc.

That way you can drill it down to as few as possible, especially with the small account, you may only be able to trade one stock at a time, so look for that stock that’s up on earnings in a hot sector.

I get asked a lot, “How do you know what the hot sector is?” Be here everyday, whether it be watching these You tubes or running your scans everyday.

  • if you are putting in the time,
  • if you are not wasting your time on social media,
  • if you are not wasting your time watching TV,
  • if you are running scans, reading the business news, tracking the markets,

It will be painfully obvious, mean its not hard to know what the hot sector is when you come in the morning, you fire up gainers scan and there are six companies that do similar things, they are all the top percent gainers. One click, you found out the hot sector.

So that’s the biggest thing that’s gonna help these stocks continue multi day, multi week and multi month. So, that’s the biggest thing I want you to do. This market we are in and I expect it to continue for years, I mean at some point it will change but for the short term, the medium term, I think we are gonna be able to play these breakouts over and over again but you as a part time trader, you as a small trader you can’t trade them all, have your criteria to build that down or cut that list down.

In Stocks to Trade Pro, we actually have a worksheet that we go over and then where we check all of these criteria to decide what is a good earnings winner. So let me know, comment below.

Do you have a worksheet? I hope you do. If you don’t, start one because again I think its kind of intuitive but as a beginning or in the medium or even advance trader,
you need to get a small list of stocks. So do you have a worksheet? Do you have a process to whittle that list down? Let me know I the comments below.