Here are five of the best-performing stocks for the past 3 months:
What did they have in common?
- All of them started their move with a huge volume range expansion. We are talking a 8% price gain on at least 10X their average daily trading volume.
- All of them offered several secondary entry points – after their big range expansion, they had one or more periods of range contraction, followed by another range expansion.
Position traders look for big 50% to 200% multi-week moves. Swing traders look for hundreds of 5% to 20% short-term moves in a year – those moves typically last between one and 15 trading days.
If you are a position trader, you should be looking for huge volume range expansions in bull markets.
If you are a swing trader, you should be looking for range contractions in stocks with an already established price momentum; stocks that started their ascent with a big-volume breakout and kept going higher.
Some patterns tend to repeat over and over again but they don’t work all the time. Not working all the time is a prerequisite to being profitable over time. The trick is to know when they are more likely not to work.
I talk in more detail about the above-mentioned setups in my book: