That said, the most frequently asked questions I get about the strategy are about not the strategy itself. In fact, the two most frequent questions I get about Record Price Breakout stocks are:

1. How Do I Know When To sell
2. How Do I know When to Buy

How and When to Sell

To answer the question of when to sell, I put together a simple yet insanely popular software tool which I shows you the exact price levels at which you would want to set trailing stops to let profits run, as well as when to exit if a trade doesn’t go your way.

Record Price Breakout Entry Strategies

In case you’re unfamiliar, here’s a link to my Record Price Breakout trading strategy.

Entry Strategy – Use My New Profitable Entry Tool

I designed this new tool to help you find chart patterns. If a stock is a record price breakout candidate, and breaks out of a well known chart pattern such as a bullish flag or continuation triangle, all the better. It will also show you at a glance if the volume and P/E ratio components of the stock meet the criteria for a record price breakout stock.

Entry Strategy – Marketclub Weekly Trade Triangles

It’s no secret that I am a huge fan and supporter of Marketclub, the Ino Traders blog, and Trade Triangle Technology. If you are unfamiliar with trade triangles, just check out this quick video:

To combine Trade Triangle Technology with the Record Price Breakout trading strategy is quite simple:

1. If all three triangles are green, open the trade.
2. If daily triangle is red, wait for it to turn green to open the trade
3. In the very unusual situation where the weekly triangle is red, wait for it to turn green.

In cases 2 and 3, the monthly triangle must always be green, and in all probability you’ll never see an RPBO with a red monthly triangle.

Entry Strategy – Just Do It

The beauty of this strategy is that the stock is at a high. This means there is little to no resistance over head, and Because you waited for a spike in volume, it is likely the stock has upward momentum and hence plenty of room to run.

Entry Strategy – Wait For a Retest
Many traders like to establish key trading levels as support before entering a trade. Waiting for price to come back to a key level before going back higher is known as a retest.

Entry Strategy – Use Technical Indicators and Indicator Patterns

Using technical indicators is a key aspect of technical trading. While I won’t describe how to use them here, I will show a setup I like to use.

In the chart below I have the Marketclub trade triangles on as well as 3 technical indicators: ADX, MACD, OBV.

These indicators follow trend strength / quality, momentum, and buy / sell pressure respectively. If there is no divergence in the ADX, the DMI+ is above 25, no divergence in the MACD, MACD histogram is positive, and OBV is rising, then entering an record price breakout is a great option.

At that time, I mentioned that crude oil has broken out of a triangle pattern at around $75, and look to be heading much higher, with price targets around $96 for a 50% fibonacci retracement.

Since that time, crude oil has shot up past $80 per barrel, and has formed my favorite chart pattern of all. A bullish flag. Bullish flags are highly reliable patterns with good price predictability.

Take a look at the picture to the left which describes the Falling Three Methods candlestick chart pattern.

The requirement of bearish falling three methods candlestick formation include,

* The pattern should be formed in a downtrend.
* On first day there should be a long bearish candlestick.
* First day candlestick should be followed by small-bodied candlesticks of following day whose real-body and/or shadow do not cross the range of first day candlestick.
* On last day there should be a long bearish candlestick which should be closed well below the first candlestick’s range.

Now take a look at the s&p 500 over the past 4 trading days:

The s&p 500 is definitely at a cross roads. First, all of the Trade Triangles have gone negative, and second, price has crashed through a major support. Take a look at this chart:

First lets take a look at the indicators. You can clearly see divergence in the MACD, as well as a negative reading on the MACD histogram. You can see negative divergence in the On Balance True Range, showing negative pressure on price. There is also negative divergence in money flow, ADX trend indicator, and a negative DM- DM+ cross over. In fact, just about every indicator I have looked at is bearish.

However, the biggest technical indicator is the breaking of the long red trend line. As you can see I have drawn in support at around $95 on the SPY, which is exactly how I’d be trading this market right now. Short the SPY, or buy some deep in the money put options.

As a technical trader, I usually don’t spend much time talking about market fundamentals. However, there are some underlying forces that can never be ignored when doing market forecasts. Clearly the price of crude oil has had a profound effect on the stock market over the past 5 years.

That said, I though it would be interesting to analyze the effect of crude prices on the S&P 500. Specifically, I wanted to highlight the price where crude oil became so expensive that the markets could no longer sustain their rally.

The Effects of Exorbitant Crude Prices

It took me a while to find historical prices for NYMEX crude that I could correlate with levels on the S&P 500. Eventually, I ended up writing a little excel script that filtered the data for me. In the end, I was able to create this chart.

click to enlarge

You can clearly see that $70 crude oil caused the markets to slow down, eventually creating the tell tale double top. Once crude crossed $90 per barrel, the S&P 500 crashed through the 1400 support level, and the rest is history.

Crude Oil Forecast

A few days ago, I watched an interesting video forecast for the direction of crude oil over the next few months. The most interesting point I took away was that the normal fall season dip in crude prices hasn’t occurred. In fact, crude oil has taken off lately. Take a moment to watch the crude oil forecast, and then I’ll show you what’s happened over the past couple of days.

Ok, so in the video you saw that if crude were to break $75, that prices should take off. We’ll let’s take a look at what’s happened since then:

Click to enlarge

The first thing that should jump out is the solid breakout through the $75 barrier that we’ve been running up against since June. We see triangle pattern that began either at $46, 54, or $60. Price targets for a confirmation of the triangle pattern would be $90 for the $60 breakout, $96 for the $54 breakout, or $104 for the $46 breakout.

Taking a look at the fibonacci retracements for crude, you can see the 50% is at $95.69, and $107.45 for the 61.8% breakout. To me, I would be setting my target at the $96 area at this point in time.

Could this be the straw that finally brings down the market?

My comparison of the S&P 500 crash to the rise in crude oil prices is clearly a very simplistic cause and effect relationship. Certainly there were other factors involved, but there can be little doubt that crude oil played a key role in the collapse.

Many traders, including myself, have been expecting this market to come down. I’ve been trading a small amount of my portfolio with a bullish bias, but at this point I’m minimizing my risk to the upside. I believe higher crude prices will have a deep impact on the markets, and I’ll be watching the $90 mark very closely.

If I begin to see signs of topping in the S&P 500, or its’ key components, I will move to an optimistic bearish bias, but will use fairly tight stops on any trades I make until key price levels indicate further bearish movement.

I hope you have found this post insightful, and I look forward to your comments.

This portfolio averages a 6% per month net profit. Check it out now!

Trading In These Interesting Times

Well my friends, we do live in interesting times, very interesting times. With China holding the largest share of US debt, inflation just around the corner, and no light at the end of the tunnel for the unemployed – these are interesting times.

So what’s going to be the best plan of action for your money in the next three years? Is the value of your portfolio going to be cut in half, or is it going to double? I have my game plan in place, do you have yours?

Introducing “The Perfect Portfolio”

I’ve given a lot of thought as to what’s going to happen in the next three years. Specifically, what I am going to do with my own portfolio and my own money. I have scoped out several markets that I think are going to offer excellent opportunities, no matter what happens to the economy. Yes, you heard me right. No matter what happens to the economy, I believe that this “Perfect Portfolio” will work for you in the next 36 months whether you have 10,000 or 10,000,000 million dollars.

6% Per Month Average Profits

We back tested the portfolio using our “Trade Triangle” technology for 42 months through some of the toughest, most difficult markets the world has ever seen. I think you will be pleasantly surprised at the results.

I know you’re going to be blown away by the simplicity, diversification, and effectiveness of these technical trading strategies. Get your game plan now!

I am going to take a break from blogging until the end of October. I will check email however, so please feel free to email me, steve@recordpricebreakout.com at anytime.

Take care,
Steve
The Trade Detective

My apologies for not doing these in real time; my wife is prego with twins and we had some medical issues to deal with, but everything seems to be ok for now.

It has been an interesting couple of days in the market, and my timing for this demonstration couldn’t have come at a more volatile time:
– a 15% spike on the VIX.
– A 3% down day (S&P 500)
– A 1.5% up day (S&P 500)

The Market Correction has finally arrived?

I’ve been stating for weeks that the S&P is looking very top heavy. There is now clear divergence on the MACD, a rise the extreme lows on the VIX, and established a clear over head resistance at 1040. This is a very important level to watch for the next couple of days, as it could provide the resistance necessary to confirm this current pattern as a short to mid term top in the market.

Status on the Live Trading Example using the Profitable Stock Exit Tool

When I started the demonstration for the profitable exit tool, I balanced the portfolio between long and short positions. At this point in time, if it were my own portfolio, I’d probably change that ratio to 3 to 2 in favor of short positions.

As it turns out, the tool is starting to push us in that direction. RDN was stopped out last week at $9.25 for a total loss of $538.48.

The current net profit in the portfolio stands at -$163.43

What to look for in the stock market and our portfolio for the next couple of days

Overall, including closed positions, we’re down $701.91. Considering the volatility in the markets, being down 4.6% in our trades, and 1.4% in the overall value of the portfolio is reasonable and very manageable.

It will be interesting to see which direction the market chooses to take. A strong break above 1040 or below 1020 on the S&P will give you clear direction on where to trade.

If that direction is down, I would expect our remaining longs to be stopped out (although I hope HIG holds on), and our short positions to increase in profit. If the market can sustain a bearish mood, we can easily turn this portfolio profitable.

New Trailing Stops

HIG – 24.22
MTG – 6.19
ENER – 13.93
NVEC – 61.97
AME – 37.41

Today was a brutal day in the market, and one of our longs got stopped out!

Unfortunately for the blog, my pregnant wife is having contractions tonight, and I won’t be able to write up the usual post. I will try and get it done tomorrow morning. Stay Tuned