Master Trader Breakout:
Do you know how to tell if something is bottoming versus just a bearish consolidation in a downtrend?
Traders and investors often “pick the bottom,” thinking they are getting a great price.
Most are traps to the uneducated trying to pick tops and bottoms.
Learn the MTS criteria to define quality setups based on the structure of the price pattern.
With all Breakouts and other bullish setups, we need a Price Void (i.e., insignificant resistance to the left) to allow the issue to move higher.
We used call options (see below) to profit from a beautiful Breakout pattern which had multiple setups and “Tells” to confirm that the Breakout was a high-probability one.
Setup: On 10/7, LAC had a +Gap Breakout, putting it on our long watch list, and then chopped around for over a week above the 20-MA building a higher range of support, which is bullish.
On 10/16, it had another +Gap Breakout and closed with a bullish Range Expansion Bar (+R/E). It would have been fine to start building a bullish position over the high of this bar but it had an excessive gap the following day.
The plan was then simple: monitor for a subsequent bullish Setup on a retracement.
That was good news since the retracement set up a beautiful Master Trader Buy Setup (i.e., retracement and reversal on support in an uptrend).
The Buy Setup triggered on 10/22 and closed with a bullish Wide Range Bar (+WRB).
We recommended buying long call options there where shown.
Call Options give you the right, but not the obligation, to purchase the underlying stock at the agreed upon stock price ($2.50/share) on or before the 11/15 expiration.
The benefits include leverage, limited risk, and most times a less loss if stopped out.
The next day was a bullish inside day setting up what we call a bullish 1-2-3 Continuation Breakout (+123), a very high-odds setup, where we recommended to traders to add, or enter as a new trade if not already long.
Multiple Time Frame (MTF) Alignment: Although not shown, the weekly chart was also a bullish Breakout and the monthly was a Climactic Buy Setup, helping to ensure a high probability of success of the stock moving higher into the Void for a swing trade.
Trade Execution and Additional Analysis
After entry, we are always in management mode, trailing pivot lows and monitoring price action with bar-by-bar analysis.
After entry, LAC moved up in a bullish, controlled manner, making for easy trade management.
You can see in the Closing Trade record how we recommending selling a ½ position into strength.
Thereafter, with the +Gap on 10/29 and excessive move intra-day, getting extended above the 20-MA, we recommended selling at a huge profit once it traded through the $5 level.
That turned out to be an excellent exit as the stock thereafter retraced 25% from the weekly high where we exited.
Profit: As you can see, the trade made $800 profit (160% return) in an easy-to-manage swing trade. Had you bought 10-contrcts (representing 1000 shares of the underlying) and followed our trade management, you would have made $1,600 profit.
Conclusion
Master Trader Strategies (MTS): Learn our proven methods for high-probability trades in all market conditions!
Directional Swing and Options Trades daily in the Advisory Swing and Options Trader Letter.