I wanted to share this with the rest of the trading community, not because I think I am a great trader or anything close to it, but I think it might help others. Recently I purchased Tim Sykes Silver program (which is great) and put a halt on my trading, until I become profitable in my simulated trading. I want to make sure that I make trades, that will give me the best odds at being profitable. With that being said, after learning the stuff Tim Sykes has to offer, it really opened my mind to other things, and I began dabbling in the world of technical analysis.
In this blog post, I will be talking about how Accumulation/Distribution, Momentum and StochasticMomentumIndex Indicators can help you buy a breakout. I've done a few simulated trades, and these technical indicators seem to help out a lot in confirming a breakout. Let me get straight to it.
In the screen shot below, you can see that I selected IDXG (most recent spiker). Now, I will not be covering how IDXG was selected as a potential morning spiker, but I will assume you selected it before the market open, waiting for a potential breakout. As you can see in the chart below, I have a volume running in the background, followed by Accumulation/Distribution, then Momentum, and lastly StochasticMomentumIndex. From what I have been learning, no indicator is good on it's own, you have to use a few of them in conjunction to make good trades. Also, if you have too many indicators, then your screen get's really cluttered and it's a mess.
Starting from the beginning you can see that when the stock opened up, Stochastics showed a "sell" crossover and also indicating it was going from "Overbought" to "Oversold. When the price reached around $5.37, something interesting happened, volume picked up, ACCDIST began trending up, Momentum picked up AND StochasticMomentumIndex indicated a buy (upwards crossover).
So, now let's say that you are in a live trade, and see all (3) indicators lining up in your favor, so you buy, now the question becomes, "When do I sell?". The answer is, that's really up to you, depending if you're trading scared, or if you are trying to be really aggressive and capture every penny. So you bought the stock at $5.37 and it's obviously trending up, a breakout, so when do you get out?
If you look at the price, around $5.90, you will see that Stochastics converged and was almost indicating a sell signal. So, if you were strictly focused on the Stochastics Indicator you would have sold too quick and left a lot of money on the table...ALOT. If you were focused on all (3) indicators you would have noticed that while Stochastics was now trending real close to a potential sell, and also in the "Overbought" territory, you would have also paid attention that Momentum and ACCDIST were still both trending up. Finally, at approximately $10.17 ACCDIST began to trend down, Momentum began to trend down and Stochastics began trending down with a clear crossover and separation of lines, indicating a trend reversal (sell in this case). So, in this setup, you could have obtained an 89% return on this breakout, in a matter of 35 min or so. (Yes, I know the stock was halted, but I hope you get the point)
Sure, this won't work EVERY single time, but I have noticed that it does work most of the time in confirming a breakout/uptrend. Hope this can help somebody in becoming the next MILLIONAIRE!!!