NEW was a combination gap up and consolidation breakout play as highlighted on last night's watchlist. The entry was $46.10. Some profit was locked in at $47.20 and the balance was sold at $47.65 which was close to my resistance level of $47.70. A second trade was taken in the last hour as volume started to pick up and a bullish engulfing pattern formed on the 15 minute timeframe.I am extra cautious trading NYSE stocks as it has been my experience that when a stock stalls and turns the other way, it goes quickly and there is a lot of slippage on stops.
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I look for stocks that are:
1. In an uptrend ( at least one higher low and one higher high);
2. At least three days of consolidation in a narrow trading range preferably at the uppermost level of the recent trading range;
3. lower volume during the consolidation period;
4. An attempt to break out the day prior to the actual breakout - this usually is a retest of the highs of the consolidation range;
5. And finally, I prefer when the stock closes at or near its highs of the consolidation range, the day prior to the actual breakout. However, this last point is not always met and does not preclude me from taking the trade.
When the breakout occurs, it is accompanied by higher volume.
Hope this is helpful.
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