Breakout Confirmation Signals

Use these to be in an instant profit

Dont repeat. Iterate

Hello mate,

My problem is this.

I try to be clever every now and then (I often overestimate my cleverness). And therefore try to enter a stock early in anticipation of the breakout (most during VCP formation).

The advantage is clear. I get a better price. And maybe also a better risk.

But there are disadvantages too.

a) Sometimes, the breakout never comes, and the stock breaks down.

b) When it comes, it does so 2 weeks late.

the second one is incredibly frustrating, especially in a bull market. When there are rockets left right and center.

You feel like an idiot when you finally jump to another stock and your dud stock moves 10% the next day.

So what’s the solution here?

Enter at the confirmation of the Breakout.

Today, I am going to tell you about the different confirmation signals you can use to CONFIRM a breakout.

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Here are the 5 indicators you can use to confirm a breakout:

1. Pivot high breakout.

2. AVWAP breakout.

3. 4-day ema (high) breakout.

4. Supertrend breakout.

5. BB breakout after contraction (especially at VCP breakout).

Let’s go through them one by one.

PS: Everything in trading is probabilistic and so are these confirmations as well. These confirmations may increase your success rate but don’t guarantee success.

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1. Pivot high breakout:

The idea here is simple. When the price close above the previous pivot high, it marks the beginning of an uptrend or a continuation of the prevailing uptrend.

Therefore, an entry after a close above this point is a confirmation.

To visualize the pivot high better, you can turn on the pivot high low indicator (freely available on Tradingview).

See example:

Ujjivan SBF & Olectra Greentech

Pivot high breakout as confirmation signals

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2. AVWAP breakout:

Anchored Volume Weighted Average Price, is a moving average of VWAP which can be anchored to a specific point (candle). I will write more about it and how to use it.

Simply, it can be used as other moving averages. The price trending above the AVWAP would mean bullish, whereas trending below would mean bearish.

But where do you anchor the Price?

on the recent swing high or the high of the base.
This confirmation signal works very well for small flag breakouts.

Eg: Nifty 50, RVNL daily, NCC weekly

AVWAP breakout as confirmation signals

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3. 4-day ema (high) breakout:

I learned this technique from the Traderlion podcast by Scot1andT. He used it as a confirmation breakout on his slingshot setup which is basically a flag breakout.

After the pole formation, the price corrects and forms the mast. The breakout of the 4-ema (high) is a proxy for the flag breakout.

Eg: KECL & Precam

4-day ema high breakout as confirmation

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4. Supertrend breakout:

This one is the simplest among all. Choose the super trend settings of your choice. Price closes above the super trend is a confirmation of an uptrend.

My favorite ST settings are 10/2 and 10/3. (but you can use literally anything that makes sense to you.)

Eg: Olectra Greentech & RVNL

Super trend breakout as confirmation

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5. BB breakout after contraction:

Possibly my favorite of all. I use the standard setting of 10/2. A breakout of the upper Bollinger band is a confirmation of a breakout.

Not all BB breakouts are tradable. BBs that have contracted below 10% are ideal to produce strong breakouts

Eg: Olectra Greentech & RVNL

BB breakout as confirmation

That’s all I had for you today. These are only meant to help you. But remember, trading is personal and you should always be on the lookout for things that make sense to you. Do let me know if you like any of this and if you use something already that you find helpful.

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If you are a beginner trader, struggling to be consistently profitable.

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This is all for this weekend,

I will see you in the next one. Till then,

Don’t stop asking those stupid questions.

~ Homma

• Some Peak Scanners for you:

  Pullback to 10/21 ma: https://chartink.com/screener/copy-shpb1021

  VCP (long-term timeframe): https://chartink.com/screener/shvcp-epic-modified

• sector rotation/ Relative strength dashboard:

  https://chartink.com/dashboard/177929