Everyone knows those stocks that spike or breakout over 30% in a single day, In this post I'll teach you how to find these stocks and
the patterns to look for when trading them.
Stocks that have these huge gainer days breakout for either two reasons.
Really good news came out of that stock or it beat its earnings, was upgraded, etc.
The stock was in one of the breakout patterns.
Since its close to Impossible for the average trader/investor to know about news before it comes out, that leaves us with one option.
Learning the patterns!
There are two patterns I look for when finding a stock that is about to break out.
A Consolidation Pattern- When a stock stays between a small price range bouncing back and fourth. "Moving more sideways than up or down"
Downhill Slide Pattern- When a stock is moving like it's going down a hill or slide and then starts to make a bottom or consolidate.
Now what I did to find these patterns was look back at what the stock did before it broke out and with doing so I started to find these common patterns all these stocks would have.
The picture below shows an example of $PULM's recent breakout. This is a perfect example because $PULM made both patterns before breaking out over 700%. You don't need to find stocks that have both patterns, one will be enough but if you come across a stock that has both that is a very good sign.
Also, something to take note of, the longer the stock consolidates for the bigger the breakout usually. $PULM consolidated for one month before breaking out.
More Examples of the Patterns.
Now if you are going to use this strategy and meathod you are going to need patience, some stocks I've waited almost two months for the breakout and on others only a couple days. The key thing is to make sure you get a good entry on it so its easier for you to hold it.
So using the $PULM example again and showing you a closer look at the consolidation pattern, how I traded this is I would find the bottom or support of the consolidation which was at 0.56 and then next set an alert to notify me when $PULMs price fell below 0.60 so I don't have to keep watching it and will know when to enter on the trade.
You can use the app "trigger" to set alerts like this on your phone.
Another strategy I will use when trading these breakout stocks is say I plan on using 20% of my total portfolio for the trade. I will buy the stock in 5% doses so in case it falls lower I can get a better price on it. I use this when trading the downhill slide pattern.
Tools to Help you Find Stocks in these Patterns.
Our Pre Built Scanner for Breakout Stocks
Trigger App for Price Alerts