Strategy Session: Find Long Term Consolidation Breakouts
at 2006-04-04 01:40:28
We thought we'd share a more sophisticated strategy that (in a modified version) one of our hedge fund customers shared with us. Here is the premise:
The key to success is to be able to spot those golden opportunities that everyone wants to be in on - early. The Strategy: Longer Term Consolidation Breakouts
How It's Modeled: To accomplish this we are going to use the Min Days Consolidations filter and set it to a value of 10 days. Meaning: every stock this strategy shows you must be consolidating in a relatively tight range for at least the past 10 days.
There's more: we then set the Min Position in Range filter to the 50th percentile. Meaning: all the stocks considered must be in the top half of their consolidation range (i.e., 50th percentile or above). This makes sure we are considering stocks with better odds of actually breaking through that resistance. The end result is a lot of upward potential.
Here's one more filter we use as an insurance policy: every stock within the consolidation pattern described above must be in the lower half of the stock's yearly range. We specifically want to look for stocks that already had some bad news or events out of the way and are now potentially making their way back up after being in a consolidated trading range. Using this filter lets us find the stocks that might be overlooked by others.
Once we define the trading universe with Trade-Ideas' filters, we then set a simple trigger point or alert, which is a New High of 5 days. This "K.I.S.S." approach works very well and demonstrates the power of Trade-Ideas, namely: creating a unique trading pattern and then being the first one to see it and trade it - early.
Who Could Benefit:
This strategy can be used by short term momentum and swing traders (i.e., positions from intraday to 2-3 days max) who know what kind of cycle the market is in for the last 8-10 days.
For extra credit you could design the opposite of this strategy for use in more bear markets. Read the Online Help definitions to get started.
Footnotes:
- Configure this strategy for your own use here.
- Link to other Strategy Sessions here.
- Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.
- June Seminar Footnote - To gain a full understanding of how this strategy and others can help you in your trading plan, we suggest you attend our training seminar in June. There we will focus on all the advanced aspects of our software needed to give you an edge against larger, more capitalized participants. We just opened the sign up page so that you can officially pay for and reserve your spot (conference limited to 100 existing subscribers). http://www.trade-ideas.com/Seminar/
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