Stock Market Trading Strategy
STRATEGY #5: Gap Up or Gainer - Afternoon BreakOut
Sometimes a stock market trading strategy is like a worn out pair of jeans. It's old, comfortable, familiar and been used many times... but it still feels right to put on. Some things in trading are timeless and this is one of them.
This one's pretty darn simple. Are you ready for this? Scan your gap up and gainer list just like in the previous strategies, except this time do it in the late morning and early afternoon. What are you looking for?
Simple patterns -- consolidating and basing type patterns. You want to see a strong rise in price through the morning session and then price should settle down into a less volatile breathing period during late morning or early afternoon. This is just a plain vanilla breakout strategy. Pretty much anything goes...laterals, triangles, tight consolidation, any price pattern that reduces volatility is a friend here.
Stocks that make a strong morning performance on higher than average volume will frequently make a slightly higher high, then just settle back very slowly and take a breather. They can appear to be going nowhere and this will be what you're looking for. If the stock starts inching it way up to resistance, put a buy stop order in and get ready for a possible breakout.
Some stocks will never make it to the starting line, but so what, there's plenty of other stocks to try. Others will explode upward making profits very quickly.
If you've been around trading for awhile, then this is a stock market trading strategy you must have seen before and you might think it's been beaten to death. It doesn't matter. Just like our friend the boring Lateral, it will keep showing it's face day after day.
Don't fool yourself into thinking that you need to discover some complicated mathematical formula to use in some high tech indicator. A stock market trading strategy or concept need not be complex to be useful in this game.
Take a look at the chart of CTL below. CTL moves very nicely from 10:00am until noon, simmers down into a nice base, almost a triangle and then BAM, breakout!
Next we have CAM.
CAM was gracious enough to give everyone a second chance at an afternoon breakout, if you missed the first one!
And not only that, the next day CAM gives those that are alert another ride up!