Daily Breakout

Daily breakouts are stocks currently in an uptrend with strong fundamentals, that have broke out to a new 20 day high on above average volume and closed above it. This indicates the stock is in a strong up trend and people are still willing to pay up for it. This is a trend following strategy that is typically a medium term hold lasting weeks to months.

Criteria:

  1. SPY 50DMA > SPY 200DMA at the beginning of the trading week
  2. Daily Breakout screener
  3. The screener will find stocks which have broken out to new 20D highs, but not necessarily closed there. Use the Donchian Channel set to an upper length of 20 on the daily chart to confirm the close was above the 20D high.
  4. Quarterly Industry performance  is >= Quarterly SPY performance
  5. The purchase price should be at least 20% below fair value.

Trade Entry:

  • Use a 4x ATR to determine stop loss and position sizing.
  • The risk will not be more than 2% of account value
  • The dollar amount to purchase will not be more than 20% of account value
  • Set limit buy order at the previous closing price, or above if the technical show a strong open is likely for the next day

Trade Maintenance:

  • Trail stop at 4x the ATR used to determine stop loss and position sizing
  • Add 1 risk unit each¬† time the expectancy gains 1, but do not add more than 3 times

Trade Exit:

  • If the stock’s 50DMA crosses back below the 200DMA
  • If the day closes below the stop price, sell the next morning