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IDENTIFYING HIGH PROBABILITY BREAKOUT STOCKS

expinthemoney | October 12, 2023

Highest Probability Patterns for Breakout Stocks

Finding breakout stocks is both an art and a science. Traders rely on visual
analysis as well as technical indicators to help them find high probability set
ups that produce less false breakout signals.

Inside Day Pattern

The first pattern is a bullish inside day pattern. The pattern is a simple
short-term pattern that has three days that are inside of each previous day.

The pattern looks like a mini triangle pattern and occurs frequently after a
strong trend comes to a temporary pause for a few days. What I like about this
pattern is that it provides a low-risk entry opportunity for traders because the
volatility and the length of the trading bars is greatly reduced from the normal
day to day volatility of the stock.

This provides a good low risk entry area without having to incur excessive risk
due to extended volatility which causes extended trading range and more risk to
the position. You can see in this example how MDCO is still in a strong uptrend
and is consolidating temporarily. The stock looks like it will continue moving
to the upside in the near future.



Look For Substantial Reduction of Volatility During the Inside Day Set Up

Tail Gap Down Pattern

Traders who follow my tutorials know that one of my favorite stock patterns is
the Tail Gap Strategy. I wrote several tutorials on this strategy and I
recommend you review them at MarketGeeks.com or our video channel.

The strategy is a pullback away from the main trend that is accompanied by a
gap. You can see several tail gap pattern set ups in this example of Sands Hotel
stock. Notice that I’m only taking long tail gap trades because the long-term
trend is clearly up.

The tail gap set up usually lasts just a few days because I want to see the
stock go back quickly in line with the trend. A reduction in volatility and
trading range is not what I want to see after the set up is triggered with this
set up. I like to see the stock get back in line with the trend within a few
days of triggering the set up. You can see in a few examples on this chart how
the stock falls very quickly back in line with the trend after trading higher
after the setup is triggered.



Notice How the Stock Comes Back in Line with the Trend After Each Set Up

52 Week High and Ascending Triangle Pattern

Some of the best set ups are combination patterns, meaning two patterns occur at
the same time. This increases the probability of trades working out even
further, especially if both patterns have no conflicts between them. In this
particular case we have a 1-year high breakout coupled with an ascending
triangle pattern.

Notice how the stock tried to break above the resistance area several times
before. The trend is strong and everything technically points to increase in
price for this stock. When multiple trades and set ups line up with each other
it truly creates the best type of environment for short term trading.



Finding Multiple Setup on the Same Stock Increases the Odds in Your Favor

Other Ways To Increase Your Probabilities

When analyzing stocks for high probability entry setups, make sure to analyze
the underlying sector and make sure the majority of the stocks in that sector
are pointing in the same direction as your set up pick.

Moreover, make sure the stock market is also pointing in the same direction as
your picks because as you know there is a very strong correlation between the
stock market and individual stocks. Many failed trades could be avoided by
following these two basic principles and using solid trading set-ups as well.


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