As the markets consolidate at their 200-day averages, some of your best next trades are ‘hiding’ at their all-time highs.
Many of these stocks will be the ‘trades that got away’ for envious trend traders.
Don’t be the trader who misses these big trend trades.
Here’s the low-risk breakout pattern to trade these very strong stocks
In the last two articles I’ve highlighted the power of relative strength in identifying great trades.
This is another example of leading strength that identifies stocks that could be ready for explosive moves.
Here’s how you can do it.
Look for stocks that have recently broken out through a significant resistance level and out to new 52-week highs. Then when the market pulls back, look for the stocks that pull back to the breakout level, and bounce.
This up and down price action should create a small consolidation at new high levels.
I like to think of this as a box on a break out level. It defines the whole trade for you. The key is to find this at the breakout level, not high above it.
Here’s an example in Bright Horizon Family Solutions (BFAM).
In the beginning of March, it broke out over its resistance at $124, but the market correction pulled it back down to support at $122, which is right below its breakout level.
Over the last two weeks it’s traded in the range of $121.40 – $125.50.
This creates clear trade entry and exit levels. Over $125.50 and its time to buy with a stop under $121.40.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation