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Bulletin 101 Part IV

Don't loose sight on removed stocks
Even though we change stocks on the Bulletin frequently please don't lose sight of these stocks that get removed. A lot of times they'll come right back in a few weeks and sometimes just days. XLA is another example of a more recent stock we had around 1.80 just a couple weeks ago and today it traded up to 3.85. Every stock that makes the Bulletin is there for a reason; it's most likely going to go up. Sometimes I'm early and we get shaken out but for the most part after the shakeout it's going to go back up. We can't time everything correctly 100% of the time. Volume is a great indicator of future direction. A stock going up on volume will continue up eventually. It may pullback slightly on lesser volume and this is a telltale sign of higher prices. This works the same in reverse with stocks going down on high volume sell off's.  They'll get a few days of rally on lesser volume from being oversold and then right back down again they go. Don't expect much from LOUD because of this very reason. LOUD has become a tax write off trade at the end of the year at this point. I don't expect to get our money back from that trade. 

Pay attention to comments
Also pay close attention to the comments on the Bulletin in case I am away from my screens during the day and not readily available to make a trade on something hitting a buy point.  The buys are not quite as important as the sells. If I'm selling it's because I believe the stock is going down. It's just like our buys we buy because we think the stock will rise most often we're right so why wouldn't we be right most of the time on the sell side

Some basic rules to follow while trading breakout patterns:
1. It's a good practice to avoid entering new positions during the first 1530 minutes of the market open.
2. Only trade breakouts that have excellent volume % relative to its 60 day volume average. To be safer it is best to trade breakout stocks that exceed 2 times their 60 day moving average. The 60 day moving average can be found on Yahoo Finance under detailed quotes. Trading breakouts with big volume % greatly enhances your chances for a successful trade. This is especially true when Day trading or Swing Trading. 
Here is a simple formula that you can use to decide how the volume % is acting during the day:
Total volume now / hours into the trading day multiplied by 6.5
Note: 6.5 is the total trading hours in a day
You then compare your result to the 60 day average daily volume for the stock.
Here's an Example:
Stock TWPD has a breakpoint of $5.25 with a 60 day average volume of 500000 shares. At 12:30 eastern time stock TWPD broke the $5.25 price resistance (breakpoint) and there has been 150000 shares traded so far.
Should you go long this breakout stock since it has broken the $5.25 resistance The answer would be NO because by using the following formula the adjusted volume is only 325000 shares which does not meet or exceed the 500000 share 60 daily average volume.
150000 / 3 50000
50000 x (6.5) 325000
3. Do not hold a position into earnings as this can cause major losses. Certainly if earnings are good it can provide significant gains but in contrast you can have significant losses if earnings are bad. Thus holding thru earnings is a gamble but not good trading.
4. Do not overweight your $$ into one position. It is a good idea to keep minimal $$ in one particular position. Our 10% rule in distributing capital and cutting losses is a good example.
5. Do not enter a position early. Wait for a pattern to setup make sure it has excellent volume % and then only enter after the price has traded through the breakout price.
6. It's a good practice to sell 1/2 of your position while you have satisfied gains for instance 50% or more. Always use stops to protect yourselves as they help avoid disasters. Avoid averaging down if a position goes against you. Maintain proper stops and realize that if the stock comes back up one can always reenter.

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