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. Breakouts, Price Reversals, and Stock Surge Patterns We scan thousands of stocks to find breakouts, price reversals, and stocks that are surging in price. These patterns are very attractive to traders. Stocks that have just had a breakout have overcome overhead resistance. Investor interest in them is very high. There are enough new "believers" in the stock to more than buy up all the shares being sold by those wanting to get out at the area of "resistance." For that reason, breakouts attract attention and even more buyers. Prices often accelerate or surge on a breakout. We scan for price reversals because they also attract attention. For this scan, we are most interested in stocks that are starting to surge after their short-term moving average has changed from trending downward to trending upward. When a stock has been in a prolonged downtrend, a great deal of pessimism has been factored into the stock's price. Usually long trends generate downside momentum and become somewhat overdone. Changing the stock's direction is like changing the direction of an ocean liner. Therefore, when a price reversal occurs, traders are interested. Why? Because the reversal means there has been enough new buying interest to absorb and reverse all that negative momentum. By definition, a price reversal occurs at the early stage of a new trend. Most people want to buy at the beginning of a new trend, especially if the price begins to surge. Price surges are located by our scanner because stocks that are surging in price also draw new attention. A price surge results when there is a sudden influx of new buy orders. New buying interest may be the result of higher earnings expectations, a new product, a favorable FDA ruling, a new cure or discovery, or some other exciting news. The price surge is the mark of new investor enthusiasm for the prospects of a company. Traders love to buy a stock that has just had a price or momentum surge because a surging stock enables them to make more in less time with less risk. Note: Because the algorithms are scanning for several patterns, you may find that a stock is included on the alert list that had a breakout a week or more ago, and you might consider the alert to be a little late. In that case, ask yourself if the alert was generated for some other reason. For example, the stock may have made the list because of a recent price surge rather than because of a breakout. A breakout or reversal may have happened a week or more ago and may have generated an alert at that time, but the stock may be back on the list for another reason that would make the alert timely. Our algorithms can detect several patterns that would make a stock an "item of interest." Stocks that surge after a recent reversal or after exceeding a previous high would definitely be items of interest. The alerts are not buy signals. They are intended to draw attention to situations that warrant a closer look. It will be up to you to decide whether or not the pattern is of sufficient interest to you to act on it. The List The following is a sample of the kind of list generated by this scan. Lists include the symbol, name, date of posting, closing price, percent change in price, and the percent change in volume. A stock may remain on the list a few days after it first appears.
Although we do not provide charts, we want to illustrate the kind of patterns that are detected by our algorithms. The following charts are of the stocks in the above list at the time the list was generated. Two sets of 9 charts each are displayed below instead of the 19 on the list simply because 18 fit better on the page. The names were omitted from the charts to provide more space for the chart and because the names are not really important. There are all kinds of great setups here. We have not drawn lines to help you see them, but you would almost have to be blind not to see the cup and handle formations, new highs, consolidation-surge combinations, or breakouts through resistance among these charts. The scan picks up other interesting patterns, including the inverted head and shoulders pattern. Most of these patterns can be extremely good vehicles for profit. We estimate that 60% of the stocks found by this scan are potential "candidates." That is an outstanding achievement even for much more simplistic scanners designed to identify relatively trivial conditions. It is one of our favorite scans for finding new ideas.
We may at some point decide to screen out stocks selling for less than $5. However, we include a few such stocks here because we want to present a broad sample of charts so you can get a more realistic sense of the patterns of behavior the system detects. . . Links To Other Places On This Web Site Stop Losses Stops Products The Valuator StockAlerts Trading Tools About Us Contact Us Fees & Refunds Links Index . All pages on this Web site are protected by copyright Copyright 2010 by Stock Disciplines, LLC No part of this publication may be reproduced or distributed in any form by any means. .
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"But thou shalt remember the Lord thy God: for it is he that giveth thee power to get wealth." Deut. 8:18
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