What factors would you scan for a stock that is consolidating & awaiting a breakout?

[Trader333]

babymush,

A while ago you said:

What does a consolidation do in the first place?

Is it for the stock to exchange hands from the "weak" hands to the "strong" hands

What consolidation can allow is "Accumulation" and by this I mean that big players can start reducing the amount of stock available by acquiring large amounts of it on the quiet. So when a constant volume is observed when the intra-day range is narrow, could be an indication that this is happening.


Paul

 

[babymush]

So it does not actually require a volume decrease

I was thinking that when accumulation takes place - The supply of a stock is reduced and demand remains the same and this is what causes the stock to Pop higher

However, even in the case where the supply of stock is reduced, if the constant volume is too high, it could show that too many people are still wanting to sell their stock and those big timers will not be able to push to price of the stock higher even if they wanted to.

On this note, have anyone ever wondered if these big players choose a time (date) to pop a stock up to attract interest. If I were them, I will wait for a day where there is LOW activity to pop a stock up in order to attract interest as they will need to buy lesser shares to move the price up

 

[babymush]

Oh by the way, has anyone wondered HOW MUCH accumulation is enough in order to reduce the supply in the market? Is a HUGE capital needed?: )

 

[china white]

Oh by the way, has anyone wondered HOW MUCH accumulation is enough in order to reduce the supply in the market? Is a HUGE capital needed?: )

what i noticed in a variety of markets is that if say a bear flag is not delivering long enough, a little nudge in volume can be enough to negate it and shoot the stock or future back up.

 

[babymush]

Bear flag - Do you mean profit taking from people that bought at or near the breakout point - The "weak" hands?

 

[Trader333]

babymush,

Maybe I can explain it better by saying that it is the combination of constant volume and narrow intra-day range that counts. If, as you suggest, demand exceeds supply then it is likely you will also see an increase in volume or an increase in price outside of the narrow intra-day range that was being discussed and the same in reverse for Short trades.


Paul

 

[babymush]

Not asking for trading entries but just wondering in this case -

Where will you put the breakout level?

Or would you not even go in at all.

 

[Trader333]

babymush,

The example above has not gone into sufficient consolidation for me to consider any type of breakout trade. I am also unsure of how volume is being demonstrated on here, is it the grey bars on the same scale as the chart ?


Paul

 

[babymush]

babymush,

Maybe I can explain it better by saying that it is the combination of constant volume and narrow intra-day range that counts. If, as you suggest, demand exceeds supply then it is likely you will also see an increase in volume or an increase in price outside of the narrow intra-day range that was being discussed and the same in reverse for Short trades.


Paul

Ahh so you are saying that the main difference in the 2 cases is that in 1, there is someone pushing down the stock price on purpose in order to accumulate more of it at the lower level

However, after they have accumulated enough of stocks that they want, if they are the only ones demanding the stock, how do they attract enough attention to push the price of the stock up and release their holdings?

 

[des44]

Charts

As I was doing my scanning today for tomorrow's picks I came up with a few BO examples.

KMI is one I bot a couple of weeks ago and still holding. Go to my Free Trading Videos to see the setup I when I entered. I plan on adding to my position tomorrow.

SMBI: Is another stock that I am already holding and looking to buy more.

d-

 

[Trader333]

babymush,

However, after they have accumulated enough of stocks that they want, if they are the only ones demanding the stock, how do they attract enough attention to push the price of the stock up and release their holdings?

It is not quite that simple but if you wish to better undertstand this then I suggest you read the posts of dbphoenix and visit his website. He has put together some very good pdf documents that explain how all of this works.


Paul

 

[TheBramble]

As I was doing my scanning today for tomorrow's picks I came up with a few BO examples.

Des, I think babymush would be interested in how you scanned for these setups. He's looking for scannable potential BO.

 

[ardhill]

Does indicators affect your decision in a Breakout Trade?

MACD, CCI, ROC or Stoch?

No indicators, just price.

 

[des44]

I have a software program (TradeSeeker) that gives me consolidation (BO) candidates. However it only gives me one out of every five that I find. The rest is found manually. I'll review around 200 charts a night looking for those that jump right out at me.

d-

 

[babymush]

babymush,

The example above has not gone into sufficient consolidation for me to consider any type of breakout trade. I am also unsure of how volume is being demonstrated on here, is it the grey bars on the same scale as the chart ?


Paul

Hi Paul,

The volume scale is to the left of the chart.

I seem to have problems finding consoldating patterns - I find that when a stock has NARROW INTRADAY RANGE and Constant Volume - there tend to be a tendency of whipsaws where the stock just goes above the high of the range (1 to 2 ticks) and fall back immediately.

This is compared to a stock that has recently had a big upmove and has a pull back - In this case, I personally find that it leads to less whipsaws

 

[babymush]

As I was doing my scanning today for tomorrow's picks I came up with a few BO examples.

KMI is one I bot a couple of weeks ago and still holding. Go to my Free Trading Videos to see the setup I when I entered. I plan on adding to my position tomorrow.

SMBI: Is another stock that I am already holding and looking to buy more.

d-

des in those cases, would you have ALREADY gone into the stock or will you be going into it if it breaks the BREAKOUT HIGH?

1 more question - in breakouts people usually require an increase in volume - If you trade on a daily chart, how would you determine intraday if the volume is high or not?

Do you just take the volume in the morning and project it to the end of the day to see if it will end significantly higher?

 

[babymush]

Des, I think babymush would be interested in how you scanned for these setups. He's looking for scannable potential BO.

Yeh bramble but I think des is clarifying what is a breakout

However, just to make it clear, I would like to filter out among THOUSANDS of stocks so that I can eyeball the left overs easier for breakouts targets instead of monitering THOUSANDS of stocks everyday.

 

[babymush]

Does indicators affect your decision in a Breakout Trade?

MACD, CCI, ROC or Stoch?
QUOTE]


No indicators, just price.

and volume?

 

[des44]

des in those cases, would you have ALREADY gone into the stock or will you be going into it if it breaks the BREAKOUT HIGH?

1 more question - in breakouts people usually require an increase in volume - If you trade on a daily chart, how would you determine intraday if the volume is high or not?

Do you just take the volume in the morning and project it to the end of the day to see if it will end significantly higher?

In most cases I have a trap already set above basing stocks. However I have recently increased my lot sizes and my trading capital is maxed. because of this I now set alarms to alert me to breakouts, which I can decide on at that moment.

See the red arrows on my charts? This is significant volume in relation to anyone standards. In these cases I'll buy after the initial BO. Remember, I am a true swing trader and will hold my positions for days at a time. The one thing that I know (and you can see in my videos) is that true BOs will run and sometimes for a long time. Look at ADSK today. This is a stock that I have been holding for sometime because it hasn't petered out on me yet. This thing is breaking out on me AGAIN.

d-

 

[babymush]

Thanks des,

Is there a reason why you buy only above the initial BO? Is it simply because you missed the trade and did not buy above the consolidating patter high? or is there some other reason?

By the way, I often notice that when volume increases by a HUGE amount today with price increasing a lot, the next day usually tends not to have a explosive move up but tends to linger around the previous price bar area - Is it my imagination or is it true? Can anyone confirm this?