This is my all-time favorite play, going long on stocks breaking to new 2-day highs or shorting stocks dropping to new 2-day lows.

Why do these work so well? Because these are the patterns that institutional buy/sell programs "kick in" on, piling in new trading volume, which is perfect for us.

Tip: best when entries are done before 11am EST, and on days where the NASDAQ composite is also outside of the prior day's high/low (or in the process of going there).

Here's a couple of examples from today:

http://www.TradingTalk.com/charts/2d...JC_29Feb08.gif



and a two-day low breakdown play:

http://www.TradingTalk.com/charts/2d...TI_29Feb08.gif



Anybody else trade these patterns? Got questions? Ask away.


to bigger winners, more often -

Ken

Probably one of the best techniques I've learned to date.Thanks Ken, for opening my eyes!

I love this sort of trade...high probability of success. As an Options Trader, this type of trade is easier on the heart.

I trade options only (long puts and calls) and since I'm looking for a 1 point gain or more I play this pattern mostly.
I also play the last 60 or 30 min before market closes if I see a nice pattern such as double top/bottom however SPX must be trending or breaking out of any consolidation.

hi Ken. I am new to this forum. How do you, as a trader, go about finding these breakouts/breakdowns? Through scanning tools? thanks

Hi Shawn, great question, it's all manual, via my esignal.com software.. I keep a running active list of around 180 stocks in it (and update it daily w/gaps from cnbc premarket ticket), then scan live during the market for what's moving. It's not easy.

Ken

Ken,
When Goldman quit posting their sector symbols what did you replace them with?
thanks

I have a few questions. I would take it you are looking at these charts at the end of day or first thing in the morning. First, does it have any importance what happened the day prior? Does the third day have any relevance other that support and resistance? I guess you are looking for consolidation of a stock with low volume for the day prior to the breakout or down. Does the Average Daily Volume need to be a little low? Does it matter if it correlates with the market or not. On breakout or down would you play a stock that’s doing the opposite of what the markets doing? And if so would you limit share size and tighter stops? Would your entry point be if you are bullish, the first pull back with increased green volume? $18.50 in your JCJC example.

Can you set up a query, to either catch a range bound stocks or the breakout or down of a 2 day high or low? Maybe setting alerts if breaks resistance at $18.25? I’m not yet to keen on queries or alerts, I’m more a manual type of guy than a mechanical. The majority of my trades are less than 15 min. thou I’ve been in a few for a life time (few hours)

New to your site and it seems great, maybe I should explore it more than asking these long winded questions……Thanks

Good questions, it would take oh about a course or lots of DVDs to go into detail... I base most of what I do on the day prior's technical patterns, no re 3rd day, no I'm not looking for consolidations, I look for high volume breakouts/fades, to determine b/o or down it's a function of the tape/time & sales re directional move, I use market direction to help weight share size, eg in-trend = 2x share size as counter trend entries, no I don't trade pullbacks.. and yes setting alerts via the software, I use esignal, helps flag breaking stocks ahead of time, so I can keep track of many at once... and of course I look at whether the stock is in one of the currently-strongest 1-2 sectors at time of entry, look for increase in volume and avg share size in the tape when pulling the trigger, look at trin, and COMPQ in- or out- day (2d high/low b/o or not) etc...hope that helps!

Regards,

Ken

Hi Ken
Very happy to have attended the last webinar.
Thanks Rob

The break outs that you illustrate are the ones that take off, what about the slow grinding ones. The small candles that just go up but takes all day. Do you put in a trailing stop and not worry about them. I know some people pay them but it's not my cup of tea. Any suggestions or strategies.

Great question. Note I'm done by 10:30 am 90% of the time. I don't trade all day. What I like to do is have 4-6 positions that I'll open near-simultaneously, then follow them with the live P&L updating, and work out of them all within a 20-30 minute timeframe. Most round trips are 7-15 minutes max.

It used to drive me nuts too, to sit there and watch "grinders" (stocks that just consolidate/chop around within a half-point) for hours, so I take the approach of "a good trade is usually good right from the start" and if it isn't, I'll close it out near breakeven. I don't give trades more than 20-30 minutes max to work out, to produce for me, from time of entry, for all day trades.

-k