Breakout

High Probability Trading with the Delphian Studies

Signals to Buying Stocks before a Breakout

Breakout Study - Bollinger Band, Keltner Channel with State Modeling

Explanation of the signals:

Bollinger Bands are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increase and narrow when volatility decreases.

Keltner Channels are volatility-based lines set above and below an EMA (exponential moving average). Keltner Channels are similar to Bollinger Bands, but Keltner Channels use ATR (average true range) to set the distance between the lines, whereas Bollinger Bands use standard deviation.

State Modeling™ is a proprietary signal from Delphian Trading. Stocks are in a State numbered from 1 to 8 at any given time and only in one state at a time. States 1, 3, 5 and 7 are bullish and States 2, 4, 6 and 8 are bearish. State 1 is extremely bullish while State 8 is extremely bearish. This signal allows users to find symbols based on their current state and whether or not their current targets or stops losses have been met.

 

Trade Theory:

When the stock price breaks above the upper Bollinger Band or the upper Keltner Channel there is a lot of upward momentum in the stock. When a stock price breaks above both the upper Bollinger Band and Keltner Channel it provides a stronger indication of upward movement. Additionally, Delphian members have access to State Modeling™ and can use State targets as a secondary confirmation of a price breakout and a buy entry.

The Breakout study uses the Bollinger Bands set at 2 standard deviations for 30 days, the Keltner Channels set at 2 times Average True Range (ATR) for 30 days and State Modeling™ set for Current State Target 3 not met as a bullish signal with expected continued price movement higher.

 

Charts depicting confirmation of a breakout:

BP State Modeling – State 1, Target 3 not hit as of 4/10/2018


BP closing price crossed above Keltner Channels 2 ATR for 30 days on 4/10/2018

 

BP price closed above Bollinger Bands 2 standard deviations for 30 days on 4/10/2018

 

BP chart after the bullish signal on 4/10/2018

 


Trade results after buy signal:

Long stock with 5% profit and 10% stop loss

Entry 04/10/2018, 5.10% profit achieved on 05/01/2018 (In trade 16 trading days)

Long call with 25% profit and 100% stop loss

Entry 04/10/2018, 54.76% profit achieved on 04/24/2018 (In trade 11 trading days)

For additional option strategy results, please fill form on the right side of the page and one of our Trading Strategists will reach out to you.

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