Jan 30, 2015 – Fast Money Setups – Buying the Expansion Range Breakout :D

Fast money setups.  Who doesn’t want them?  Everyone wants the fast 5%, 8% moves in a day or in a week , sometimes the market is giving us more gains such as 20-40% gains within a month?  How to maximize and ride them?

First recipe for fast money is that everyone should be making money.  No one should be losing money.  The point is, it has to be in an uptrend.

The best fast money made is when there’s a long consolidation (as tight as possible) and then a breakout with strong volume.  Of course, we want to make the fast money in highly liquid names as well so that everyone can participate entering and exiting without any difficulty.  In the Philippines, the minimum liquidity (or value turnover) filter for large cap daily value traded turnover should be at least P50M to P100M pesos every day so that when things go awry, we have minimal slippage problems as well.

Best way to learn is through examples:

Let’s talk about some favorites:

#BDO

This is a highly liquid company. You can actually put in P100M and get out of the stock P100M with very minimal slippage.  This is why I like stocks like these.  Note that near support levels of #BDO at P95, there was a tug of war between bulls and bears, bullish engulfing showed bulls were winning.  At P98-99, there was a battle ground to check who would win and the next day when it broke above P99 , it was very clear we have a winner and it was the bulls.

How to trade the fast money?

1.) Note that by siding with the bulls to buy the P99-100peso level, the risk is only for the stock to fall back to P95 but the reward for quick wins is fast at P105-P110 because the breakout above P100 was a breakout which was already confirmed from several “battles” from the bullish engulfing stage to the battle ground stage.  Siding with the winner for the quick win doesn’t quite give you much return (maybe just a 5-8% return but it always gives it fast as a celebratory win for the bulls).  Note that the win allowed bulls to rise as high as above P108 during this time in 2 days or an 8% gain even when you’re late at 100 in entering and a P13 peso gain from the P95 support buyers.  Note also that if it pulls back to the breakout level, you have another low risk entry setup to keep adding on your position as you now know the bulls win.  It is but easy to ride and add more on pullbacks if it does happen and in fact double or triple your volume on the pullback.  This way, you are already assured that you’re getting in with a low risk setup and the reward is usually 1:5 or in this case, goes down to 98 or goes back to 108 from the 100 level.

2.) Buying breakouts and the pullback from the breakout is a very proven way to make money.  The concept is very simple. You’re always buying at the new support ledge.  You’re buying with an upside resistance which is technically new highs so it’s easier to rise (absence of selling blocks coz they usually will sell only for a certain 5 to 10 peso distance judging from previous boxes.  This was a strategy heavily used by Nicolas darvas in his book “how i made 2 million dollars in the stock market.”  Use this as often as you find it as this is one of the highest probability setups one can find.  You buy two ways, buy on the breakout and buy more on the pullbacks if any.

bdo example

Think this is a one off event example?  I’d give you another one.

#RRHI – see that same move? it breaks out of 60 moves 66 in two days or 10%.  too fast too furious move so there’s an inevitable profit taking allowing you to re enter at 60 again or near that.  Know what happens after?  See the next chart.  Complete goodness. new highs. new trend. new ranges. 😀

rrhi example

the good thing about buying breakouts is you’re actually buying the new support of the new range.  People think it’s scary so buying new highs looks scary but it’s actually one of the safest things to do.  (especially for large consolidation breakouts).  You risk little versus the reward of an expansion of the range which is usually the length of previous box.  Look at all the instances of rallying then retracing back at previous breakout point.

#RRHI is getting interesting again, it looks as though P80 is about to be broken and another fast money is coming.

rrhi example 2

Some breakouts are too powerful, they never leave room for a re-entry to add more on pullbacks.  I’ll give an example.

Example of a Breakout without any Pullback:

#X

x example

So till next time and happy trading 😀

We’ll cover more setups and more examples in next blog posts.

#STUDY with Faceless Trader 😀

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One Response to Jan 30, 2015 – Fast Money Setups – Buying the Expansion Range Breakout :D

  1. dkl says:

    Hi Nikki,

    Very informative, I hope to apply it in my trading.
    Thank you for sharing us your knowledge.

    Like

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