The Next Leg

Thrust

Over the past few trading sessions the dam burst and a sizable breadth thrust is under way.  There have been numerous price swings of magnitude to the upside that, should price action compress through time over the next 5 to 10 trading sessions, will set many of them up for their next pivot swing.  This is the time to focus on curating a stock list of extreme price/volume expansions.

One of the simplest means of scanning for these moves is to refer to the collective trading wisdom of traders past and focus upon 100% moves.  This knowledge of this phenomena has been passed down for generations long before it had been quantified.  The more tried an true variant of this is to scan for stocks that are up 100% year over year, however there are some flavors for shorter time frame traders that are worth investigating.  One of these is noted by Mark Minervini in his book, 'Trade Like a Stock Marker Wizard.'  On page 253 he writes about his Power Play which describes a stock that moves up 100% in under 2 month period and to follow this for two to three weeks thereafter.

Stocks That Double

Studies of momentum trading inform us that stocks that have high velocity moves over shorter periods have a strong tendency to revert.  This helps act as a filter to separate the wheat from the chafe.  Stocks that persistently maintain a double ratio are worth keeping on a focus list while those that revert can be pruned.

Persistently Doubles

Spike and Reverts

Scanning list of multiple moves over varying time frames can assist in curating a focus list of stocks that are participating in the current thrust and will persist and compress through time or revert in price.  For myself I look at stocks that are up 20% over my standard time frame and stocks that are up 25% for the month, continually looking to exploit 4 to 5 20% moves as they make their way to 100%.

20-25% Moves