‭THE #1 Breakout Trading‬

‭Plan… (‬‭It Works!‬‭)‬

‭ Continuation Breakout Trading Plan‬

A
‭Tutorial‬

‭By Netpicks.com‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭Welcome to the breakout trading plan tutorial!‬
I‭n this free guide, you will learn a step-by-step method to help you develop‬
‭a complete trading plan for trading breakouts.‬

‭What are breakouts?‬

‭ reakouts are significant price movements that occur when a stock breaks‬
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‭above or below a consolidation, a prior candle high or after a small pull‬
‭back in price. By identifying and trading breakouts, you can take advantage‬
‭of potential high-reward opportunities.‬

‭Breakouts we will trade‬

‭ e will focus on a specific type of breakout setup (there are a few breakout‬
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‭types) that has certain‬‭criteria that must be met‬‭to be put on a watchlist.‬

‭Continuation Breakouts‬

‭ nlike consolidated breakouts that take weeks and months (even years) to‬
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‭form, continuation breakouts have a time limit of 10 days or less to form‬
‭prior to breakout out. This tells us that buyers are eagerly interested in the‬
‭stock and we can expect (not guaranteed) a strong “pop” when price‬
‭breaks.‬

‭Source: Netpicks.com‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭ ontinuation breakouts are held for 2 - 5 days (‬‭up to 10 days on higher‬
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‭priced stocks‬‭) and exit when price stalls or you’ve‬‭seen a 10-20% price‬
‭jump.‬

‭ hese breakouts‬‭do not require high volume‬‭on the‬‭break to work.‬

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‭These breaks are following the natural rhythm of the market: impulse leg >‬
‭corrective leg > impulse leg. These breaks are also‬‭not always‬
‭recovering‬‭above high level resistance. Look at the‬‭third breakout in the‬
‭above graphic.‬

‭ onsolidated breakout are generally held for a longer period due to the‬
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‭length of the consolidation. These‬‭require higher‬‭volume‬‭on the break‬
‭and the potential of a long run in price is there.‬

‭Source: Netpicks.com‬

‭ rades taken through consolidated breakouts can be held through‬

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‭retracements and trading ranges. These require patience and the ability to‬
‭sit through disappearing paper profits during corrective phases.‬

‭ e want to take our 3-5 day trades and then exit with gains of 10%,‬
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‭20% and sometimes a lot more.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭How To Find These Setups‬
I‭n order to locate these setups, you need to follow some very important‬
‭steps:‬

‭ xplosive First Leg:‬ ‭The impulse move must be at‬‭least 15 - 20% which‬
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‭shows plenty of interested buyers. Prefer that this impulse move is within‬
‭the last two trading weeks.‬

‭Source: Netpicks.com‬

‭ his chart shows a 25% jump in price from the bottom which qualifies us to‬
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‭look further into the chart to see if it fits our next step.‬

‭ onsolidation Period:‬ ‭We need a few days of consolidation‬‭with low‬

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‭volatility. We don’t want to see strong thrusts to the downside which may‬
‭indicate less interested buyers.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭Source: Netpicks.com‬

‭ fter a 16% thrust in price, a clean and orderly consolidation takes place.‬
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‭Also note the low volume inside the consolidation.‬ ‭The “spring”‬
‭candlestick is an early entry for advanced traders‬‭.‬ ‭There is no‬
‭breakdown in price or any significant price action to be concerned with.‬

‭ or traders that are conservative and skipped the spring entry, we want to‬
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‭see a narrow range day prior to the breakout which is what we see here.‬

‭ HEAT: Use a 1 period ATR and look for a spike down the day before‬
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‭the breakout.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭Source: Netpicks.com‬

‭Breakout Day‬
‭ he day arrives and price breaches resistance level. We want this to occur‬
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‭early in the day and we can use pending orders at the breakout level‬
‭without‬‭waiting for confirmation. This will depend‬‭on the quality of the‬
‭consolidation.‬

‭Source: Netpicks.com‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭ n this chart, price made a 37% jump in price and put in an orderly‬
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‭consolidation. The early entry is noted as the‬‭prior candle was a narrow‬
‭range day‬‭with less than 2% price movement. An entry‬‭above the high of‬
‭that candle ($9.30) fits the strategy.‬

‭ dvanced traders may look for early entries. The‬‭key‬‭is a small range‬
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‭day less than 2% +/- movement.‬

‭Stop Loss‬

‭ he stop loss on these trades is simple - low of the day. You may‬
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‭implement a maximum 2-4% risk from entry if entering early in the morning‬
‭and on the above example: $9.30 * 4% = .37. Also slightly more than half of‬
‭the days range is appropriate.‬

‭Follow Through‬

‭ e want to see the day of entry close on the high. If not, you must decide‬
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‭whether to hold or close. We want to see follow through on the day to‬
‭“confirm” the breakout is legitimate.‬

‭Scale Stop‬

I‭f closing strong, traders may reduce the risk on the trade and move the‬
‭stop up to just below the 50% level of the entry day.‬

‭Profit Targets‬

‭ ny large move that is greater than the recent past is one technique. Close‬
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‭after 3 - 5 days depending on the price action and your risk tolerance.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭In A Nutshell…‬
‭ . Continuation breakouts are significant price movements that occur when‬
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‭a stock breaks above or below a consolidation or from a small pullback in‬
‭price.‬

‭ . Continuation breakouts have a time limit of 10 days or less to form prior‬

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‭to breaking out, indicating strong buyer interest and the potential for a‬
‭strong price movement.‬

‭ . These breakouts are typically held for 2-5 days (up to 10 days for‬
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‭higher-priced stocks) and are exited when price stalls or after seeing a‬
‭10-20% price jump.‬

‭ . Explosive first leg: The impulse move must be at least 15-20% within the‬
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‭last two trading weeks to indicate plenty of interested buyers.‬

‭ . Consolidation period: There should be a few days of consolidation with‬

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‭low volatility and no strong thrusts to the downside, indicating less‬
‭interested buyers.‬

‭ . Breakout day: The breakout should occur early in the day, and pending‬
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‭orders at the breakout level can be used without waiting for confirmation.‬

‭ . Stop-loss: The stop-loss should be placed at the low of the breakout day‬
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‭or a maximum of 4% risk or slightly more than half of the day's candle. I‬
‭generally use the 2-3% (higher price stock >$10) 8-10% (lower price stocks‬
‭<$10) and half days range depending on entry.‬

‭ . Follow-through: It is ideal to see the day of entry close on the high,‬

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‭indicating confirmation of the breakout. If not, traders must decide whether‬
‭to hold or close the position.‬

‭ . Scale stop: If the breakout day closes strong, traders may choose to‬
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‭move the stop-loss up to just below the 50% level of the entry day, reducing‬
‭the risk on the trade.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

‭ 0. Profit targets: Look for any large moves that are greater than the recent‬
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‭past as potential exit points. Close the position after 3-5 days, depending‬
‭on the price action and risk tolerance.‬

‭ 1. It is important to enter these breakouts quickly and not wait for the close‬
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‭of the day, as waiting can diminish the odds of positive movement.‬

‭ 2. Note that these strategies should be used for educational purposes‬

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‭only and should not be considered as financial advice. Always conduct your‬
‭own research and consult with a professional financial advisor before‬
‭making any investment decisions.‬

I‭t is essential to understand these strategies before implementing‬

‭them in real trading scenarios.‬

‭Wrapping Up‬
‭ reakout trading can be a powerful strategy for capturing potential‬
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‭high-reward opportunities in the market. By focusing on continuation‬
‭breakouts, traders can take advantage of significant price movements that‬
‭occur when a stock breaks above or below a consolidation or from a small‬
‭pullback in price.‬

‭ he key to successfully trading continuation breakouts lies in following a‬

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‭structured trading plan. This plan involves:‬

‭‬
● I‭dentifying an explosive first leg‬
‭●‬ ‭Identify a consolidation period with low volatility‬
‭●‬ ‭Look for a low volatility day with less than 2% up or down‬
‭●‬ ‭Enter the trade with a stop-loss set at the current low of the day.‬
‭●‬ ‭Look for follow-through in the form of the day closing on the high‬

‭ raders can then consider scaling their stop to reduce risk, and identify‬
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‭profit targets by looking for large moves compared to recent price action. It‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

i‭s important to closely monitor the trade and adjust stop-loss levels‬
‭accordingly.‬

‭ his strategy requires practice, patience, and diligence. As with any trading‬
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‭strategy, there are risks involved that you must be comfortable with.‬

‭ y following the steps outlined in this tutorial and developing a well-defined‬

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‭trading plan, traders can improve their chances of successfully trading‬
‭continuation breakouts and potentially achieving profitable results.‬

‭ ote: The strategy mentioned in this tutorial is for educational purposes‬

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‭only and should not be considered as financial advice. Always do your own‬
‭research and consult with a professional financial advisor before making‬
‭any investment decisions.‬

‭Copyright 2024 Spirit Funds LLC‬ ‭www.NetPicks.com‬

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‭ ypothetical performance results have many inherent limitations, some of which‬

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‭are described below. No representation is being made that any trading account will‬
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‭frequently sharp differences between hypothetical trading performance results and‬
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‭ ne of the limitations of hypothetical trading performance results is that they are‬

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‭generally prepared with the benefit of hindsight. In addition, hypothetical trading‬
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‭ r subscribers. This also means there is no guarantee that one applying these‬
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‭methodologies would have the same results as posted. Since trading successfully‬
‭depends on many elements including but not limited to a trading methodology and‬
‭trader psychology, our website does not make any representation whatsoever that‬
‭the above mentioned trading systems might be or is suitable or profitable for you.‬

I‭n addition, it’s important to understand and accept that there can be data outages‬
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‭and less than ideal fills. There can be no guarantee that your account will always‬
‭be able to enter and exit the program’s ideal entry or exit point.‬

‭They carry a high degree of risk.‬

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