Some or many of you may have seen our old breakout stocks analysis on Twitter, which is currently unavailable. ‘How do you find breakout stocks?’ – such messages used to come frequently.
I or my team are not using any software or website stock screener tool like 52-week high-low, penny, undervalued, momentum, indicator, candlestick, multibagger, etc.
One common thing in all the stock or index breakout selections is Price Action which is enough. If you know how to trace the movement on the chart, then there are 3-4 more things to keep in mind.
Breakout Stock Selection
Finding a breakout stock and trading it are two different things. Now we will only focus on stock selection.
A breakout soon stock is one that is going to change direction. Finding the right trendline is very important. Stock chart patterns, support, and resistance are in the next chapter.
We tried some scanners but did not get precise good results. Manually (one-by-one) scanning in the Daily, weekly or monthly timeframe is best as per practice.
Our main focus in the watchlist is on Dow Jones (dji), S&P 500 (spx), and Nasdaq Composite (ixic) indices stocks. After that, we keep an eye on the stocks coming into the news headlines and internet community limelight.
Simple Steps to Find Breakout Stocks
Here are the 3 key things to look for in the breakout stock search process:
- Find a Trendline.
- Spot a Chart Pattern.
- Support or Resistance Break.
To find a breakout, the first thing is to draw a trendline on the candlestick chart by connecting the swing highs or lows in any stock script.
Now proceed with that script only if the price is near the trendline. Otherwise, go to another script on the watchlist to find a new line. You can have more than two lines in a script.
If there is only a trendline then observe the candlestick chart price action of that stock during live stock market hours.
Spotting any following candlestick chart pattern on the chart needs some practice. Anyone can develop it gradually. The presence of a breakout pattern gives confirmation of catching the trend direction.
- Head & Shoulders
- Cup & Handle
- Symmetrical, Ascending, and Descending Triangle
- Rising, Falling, and Sideways Channel
- Bullish or Bearish Flag
- Double Bottom & Double Top
- Rising Wedge and Falling Wedge
There is no problem if no trendline or pattern is found. Finding a strong support break or a resistance break is easier than the previous two steps.
Just check the daily or weekly timeframe chart and try to discover a parallel sideways movement. After some sideways trading, look for the price action at the upper or lower area.
Detect moves in live trading hours for an intraday trade or for positional setup a trader can wait for candle closing outside the range.