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Posted 6 months, 19 days ago.

Why Buying Breakouts Is Never As Easy As It Seems

Tags: Breakouts, Patterns To Buy

TIM $15,138, Up $137, Learn From This Well Executed Trade

Check out my take on financial stocks in my latest AOL Article

As I stress in my badass surprisingly well-received 6-hour instructional DVD cum 220-page instruction manual and autographed book package (what is this word self promotion?), I only to want buy stocks breaking out. Now this is a very general term, so thankfully my trade today on teenage stock (YTEC) trade exemplifies EXACTLY what I mean—when I bought my 300 shares late morning at $18.28, it was an intraday, 3-day, 5-day, a 5-month breakout (over October’s highs) and aside from one brief spike last Friday, represents a new all-time high. So you have breakouts on several time frames—which are sure to pop up on a ton of traders’ technical screens—and some nice trading volume that made all that goodness happen. I was immediately proven right as for the first 10 minutes of the trade; I was up between 10-25 cents/share with even more trading volume. When somebody asked me why I bought at such a strange price (especially late morning—usually never!), I posted this comment:

“and that intraday high was a 5day breakout (save for that one spike), which was also an all-time high. one of these days one of these spikes is gonna stick and some of the 130k shorts will cover, causing a real spike over $19”

Within another 10 minutes, that’s EXACTLY what happened. The price rose gradually to the $18.75 area and then all of a sudden, somebody put in a 20k buy order at market (probly a panicking short) and pushed the price up to $19.30 within seconds. The only mistake I made was taking a long-term (1-2 days) outlook and wasn’t prepared to sell into such a quick spike—after all, when I wrote about YTEC in this article I said I didn’t want to buy until a close over $18, which hadn’t happened yet. (I simply jumped in because sometimes stocks don’t wait for everything to go as planned, you gotta think on your feet.) But, while I was bummed I didn’t catch anything over $19, I thought I’d get another crack at it later in the day—after all, like APWR, I was gunning for $20! But within minutes some big sell blocks appeared on the ask and the bids started to weaken so I said screw it, give me my 50 cents/share (after all, it’s tough to hold late morning spikes and the stock had lost $1 from its spike in the same EXACT pattern last Friday, so I wasn’t about to take any chances). I sold 300 shares at $18.77, a decent $137ish gain.

Good thing because as you can see from the chart below, the stock tanked $1+, 50 cents below my original entry, in the next half hour before rebounding slightly (closed over $18, but I don’t buy into weak closes). This is why I hate buying breakouts; they just are never as simple as shorting, at least for me for some reason.

ytec

Perfect entry + decent exit=well executed trade, no matter that the quickness and small profit were def. not what I expected.

TIM Lesson: When a stock doesn’t act EXACTLY according to plan, exit quickly, especially if you have any profits

Ironically, out the 3 teenage stocks I featured yesterday, YTEC performed the worst. But, I don’t feel any regret not playing (VNUS) or (CCC), neither had the near perfect YTEC-like variables to make them high probability setups.

(NYNY) surged 80% on this mid-day news. Love it or hate it, I don’t play news movers—too many varying expectations/opinions makes my price action analysis highly unreliable. Likewise, I ignored (SUF) because they won a contract and I prefer to short fluff—like the IDMI trade the other day (which was a good bounce play this morning, but moved too quick for me to catch it)

Almost bought another breakout play before the market close, (ORCT). Compare its chart to YTEC and you’ll see that $9.20 is a big multi-day/multi-month breakout. One last round of research helped me realize they’re reporting earnings tomorrow morning. No, thank you! I don’t play the earnings guessing game, especially on stocks that have doubled off their lows in the past few weeks.

orct2

Missed the solid close on (APWR) due to my ORCT research, probly a nice gapper, but it needs volume to really breakout

PS Please stop freaking out about my library—still porting over lots of stuff…and also pleaseeeee stop emailing me questions on individual stocks, I’m so far behind, my answers will be dated. Much easier for me to respond on the comments section under each post and that helps others too!

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41 Responses

1Dave

February 11th, 2008 at 5:42 pm

As oil rises is AKNS set to breakout?
2timsykes

February 11th, 2008 at 5:51 pm

AKNS–too much overhead resistance for my taste. speaking at rutgers tonight so sorry if i can’t answer your questions before the open tomorrow.
3Gman

February 11th, 2008 at 6:05 pm

Not bad Tim, you’ll never go broke taking profits!!!

I’ve been in YTEC since 2/5/08 right after the breakout of resitance. I only got 100 shares but have been picking away at it on small 25 share dips. So far my avg cost is 17.95.

I know this isn’t your strategy but I’m keeping my eye on the MACD-Histogram and won’t close out my position till it begins to go down, as I think this will still go up. I was really debating getting out on 2/6/08 but think I should have been buying more!

I also got my mental stop around 17.10. I’ll let it ride out as I think the breakout will still see some higher highs. I learned my lesson using a stop on JRCC at 13.29 now it’s much higher but still turned a profit…
4curious one

February 11th, 2008 at 7:08 pm

i noticed tim is not progressing, stuck at 12k for some reason, techinical difficulties?:)
5Evan

February 11th, 2008 at 7:12 pm

Curious One,
You’ll notice a small arrow pointing to the 12k, but the progress bar grows a bit after that- which should be around 15k.
6Adrian

February 11th, 2008 at 7:33 pm

TIm, etfc ran into a lot of resistance today just short of 5.50 do you think etfc will retest the lows around 4.20 before it makes another run up. Im kind of confused on this one with etfc having a great open. Secondly im a freshman in college so i dont have the luxury to watch the stock all day. And if its not to much to ask how should one be playing this stock? So far ive been taking profits on gap ups. But when i have to go to class where should my stops be placed on these gaps? I ask of your advice because i’ve read a lot about how you traded and were successful in college. Any advice for a young trader is greatly appreciated. Just trying to get a little feed back from someone i view as a successful trader. Keep up the good work!
7Stan

February 11th, 2008 at 7:50 pm

im in college, too. i bring my laptop with me in bag just in case, we have internet all over campus for free.. but if i have any positions i check the progress on my phones internet browser and refresh every few minutes (get a pda type phone)… checking the chart too. sometimes i have to put a limit order on where i want to get rid of the stock. i miss out on so much because of class and my internship 2 days a week, i feel u and it sucks. sometimes u gotta skip class too. class is overrated. haha
8Brian D

February 11th, 2008 at 8:02 pm

Stan I am with you on this boat, I too miss a lot while I am in class and I do not even have a laptop. I hold many of my trades for 2-3 days to 2-3 weeks. As a matter of fact I’m up 28% on the year, made a killing last week and this week started out nice. I work an internship as well, so I can’t always get to my stocks when I need to it blows. Getting a new phone in March and am seriously considering a PDA, class and work are a bitch, but in my eyes being in class and having to go to work keeps me patient and has helped me grab some serious profits, but on a day like today where IDMI stopped me out (tightened my stop big time in case something like this happened) I would have liked to be in front of the computer trading the other side after I shorted the living hell out of it. Class, and work = patience in the markets.
9russ

February 11th, 2008 at 8:43 pm

I think Potash POT is an unbelievable company in the “sweet spot” of world economic expansion. They have pricing power and the demand for potash, nitrogen and phosphorous is insatiable. I am seriously selling all of my other holdings and start to accumulate as many shares of POT as I can afford. Buy the dips if there are any dips as this stock will be the play of the decade. What do you think Tim, just look at the technicals and the fundamentals….I am all-in!!!!
10timsykes

February 11th, 2008 at 9:41 pm

Blogging from rutgers!!!!
11Tony Ellis

February 11th, 2008 at 9:52 pm

Will you buy APWR if it breaks $19 with good volume in the morning?
12D

February 11th, 2008 at 9:53 pm

Hey I went to Rutgers!! what are you speaking about there?
13admin

February 12th, 2008 at 12:18 am

THE LIBRARY IS UP!
14timsykes

February 12th, 2008 at 1:37 am

Just gave one of the best speeches of my life, judging by the crowd, I think I did alright. ETFC, I wouldn’t touch until its breaksout at $6+ and even then its scary considering that’ll be waaaay off its lows

POT–waaay too pricey for me and I prefer MOS
15timsykes

February 12th, 2008 at 2:02 am

APWR, doubtful, i would be selling into $19, it’s gotta prove it can hold and have the volume to extend to interest me. YTEC was PERFECT today and for me to only get 50 cents out of it is sad–means the market isn’t a big fan of this pattern right now
16timsykes

February 12th, 2008 at 2:03 am

Spoke to the LIBOR group of young investment bankers about my experiences and lessons learned. basically like my book but more swearing
17Mike

February 12th, 2008 at 2:51 am

LOL @ more swearing - gotta add a little extra spice in there right?
18Jason R.

February 12th, 2008 at 5:07 am

Tim, any audio or video of your speech?
19Armin

February 12th, 2008 at 6:46 am

What about TCCO? http://seekingalpha.com/articl.....urce=yahoo
Made 0.48$ last quarter as of yesterday`s earnings report. EPS last 4Q 1.09, price: 7,40, P/E 6.8, only 1.2 mio. shares outstanding, 2.5 mio cash, no debt, backlog > 3 Mio. $; yesterday new 5year-high, strong close, could be a great momentum play in my opinion even when they said next quarters will probably be bit lower revenue?!
20timsykes

February 12th, 2008 at 9:13 am

no audio or video, but i have a whole bunch of speaking gigs coming up–one at the traders expo on feb 18–so i’ll have footage shortly.

tcco, nice uptrend, but low volume and low volatility make it unappealing
21S Adams

February 12th, 2008 at 9:52 am

JRJR and CHNR are taking off again. CHNR jumped to over 3 from yesterday morning. Both have great volatility for trading. Not for the faint of heart though
22Tony Ellis

February 12th, 2008 at 9:57 am

Nice call on APWR. Thanks!
23Al

February 12th, 2008 at 10:04 am

NYNY taking off also.
24S Adams

February 12th, 2008 at 10:52 am

That JRJR should be JRJC
25Clay

February 12th, 2008 at 11:26 am

Tim,
Do you have a recommendation on the best (cheapest) online broker? I find myself waiting too long to book profits since $10 trades eat into my gains.
26russ

February 12th, 2008 at 11:27 am

Thanks to MON, Buffet and Global Growth, Ag sector breakout. Go POT!
27JesseD

February 12th, 2008 at 12:04 pm

tim, what do ya think of SWC? Big run up on staff changes, but I don’t like the financials. Break out or good short?
28Evan

February 12th, 2008 at 12:33 pm

I know this isn’t the type of strategy used on this site, but I got into NURO this morning after hearing the conference call, noting that it can’t be shorted (Reg-Sho), and most sellers at this point are priced into the stock from yesterday’s huge % drop. Even if it corrects 50% of today’s drop, that’s good money. Any thoughts?
29be-the-ball

February 12th, 2008 at 12:33 pm

SWC, breakout, too strong for too many days
30tomandmike

February 12th, 2008 at 12:40 pm

We miss the old site, any chance it will come back?
31Randy

February 12th, 2008 at 1:04 pm

The new site is much better. If possible put up a link for the google homepages out there. People can see when your blog is updated from their homepage. Many thanks
32Jeff C

February 12th, 2008 at 1:31 pm

Anyone buy into ALAN this morning?
33Neil

February 12th, 2008 at 1:55 pm

anyone looking at coin or seed as a play on the monsanto earnings?
34Jeff C

February 12th, 2008 at 2:04 pm

ORCT forming an intraday double-bottom…
35Jason R.

February 12th, 2008 at 2:11 pm

VRX as a possible short?…Might be another IDMI…Came out with some positive news on their epilepsy drug.
36Neil

February 12th, 2008 at 2:22 pm

I wouldn’t short vrx because it is way down off it’s highs, good news, Huge short % of float may want to cover
37timsykes

February 12th, 2008 at 2:28 pm

Randy, can you explain what you mean about Google’s homepage?
38Jason R.

February 12th, 2008 at 2:32 pm

Neil, thanks for the heads up idea.
39Neil

February 12th, 2008 at 3:02 pm

just my opinion, although it is moving down now.
40Jason R.

February 12th, 2008 at 3:17 pm

Neil, I see it is moving downward…I will keep a watch on it…I’m still learning short selling, lol.
41Reese

February 14th, 2008 at 6:01 pm

It’s the old Dan Zanger approach: If the stock doesn’t move in the right direction almost immediately, sell it and move on to the next.