One of my favorite swing trade setups is the Earnings Breakout-Pullback Setup. It works in almost any market. The reason this setup is market proof is that earnings gives the stock a catalyst that often trumps what is going on in the market.
While there are many ways to trade earnings breakouts, this 5 step setup is easy to identify and profitable for swing and part time traders:
1) A stock that has formed a long base or range
2) A big gap breakout
3) A huge volume surge
4) A pullback to the bottom of the breakout bar for entry
5) An exit near the top of the breakout bar.
Let’s look at recent winning trade $ACCO. Trade Report members were alerted of my entry as price hit the bottom of the breakout bar the day after the initial earnings breakout. The stock traded within the range for a day before bouncing up to the bottom of the breakout bar. This is a good place to exit as the first test of the top of the range often leads to a pullback.
Now that you have have studied this example, keep track of stocks that breakout on earnings and track how the post breakout range develops. In the report, we are now tracking 16 of these stocks since earnings season started two weeks ago. Feel free to discuss your setups int he comments below.
Other articles in the breakout series:
Part 1: The breakout pullback setup
Part 2: The breakout-remount setup
Part 3: The breakaway gap setup
My focus list is, market analysis and trade alerts are all featured in the Market Speculator Part-Time Swing Trade Report. If you would like to receive the swing trade report and alerts, sign up for the free trial. Follow me on twitter or email me at SinghJD1@aol.com
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