Thread by @im_naresh

52Week High Breakout Secret
Why Many traders prefer 52Week breakout strategy and why it works for all of them most of the time, lets try and find out.

1/12 Long term positional trader look for at-least more than double digit percentage gains on their investment. And few of them to double – triple or more from where it is bought. This is how the real wealth is created. This is how Mutual Fund or any professional trader Invests

2/12 Now the problem is how to identify that which one is going to be a winner. The honest answer to that is nobody knows and we should also not try to predict it.

3/12 If Stock wants to double or triple than one thing is for sure that it has to first break its 52Week high than only it can grow multi fold. So the best place to catch them is when it crosses 52week high range.

4/12 So shall we invest in all stocks which are going to break its 52week high based on our percentage allocation of portfolio criteria or only in selected stocks. Can there be a fake breakout? Yes, and stock may take a nose dive from there to break all long term lower levels.

5/12 Lets try to understand psychology behind 52week breakout
a) All traders bought in last 52week are in profit
b) Traders who bought a year ago and not sold may be a long term investor
c) In absence of resistance and lack of supply from higher level, we may see a long Uptrend

6/12 How do we identify which stock we should invest and which one to ignore?
You must decide your own rules for the Game. You can combine Fundamental and Technical criteria or may stick to one of them.

7/12 Technically Look for stocks which were in a bear market for a long period of time, then was in a range / consolidation and now breaking its 52week high. This shows that bears couldn’t take price lower for a good enough time and now the bulls are active.

8/12 Your Trading Strategy must be very clear and documented. Follow the same with strict discipline. Some of rules I have given below for your reference. These are just a few indicative examples and not the complete list.

9/12
1)Fundamentally strong companies with increase in sales and profit trend for past 3 – 5 years
2)Low PE multiples preferable
3)Possibility of growing revenue because of new product, business, technology, management, etc. Basically a story which can run for next 3 to 5 years

10/12
4)Decide your stop loss criteria may be break of your favorite moving average, or ATR multiple, or market structure, or any other method you are comfortable with.
5)Prefer not to choose penny stock, exits may be difficult if starts moving circuit to circuit

11/12
6)Diversify stocks in all sectors but not more than 15, 5 to 10 may be ideal
7)Try to identify trending sector, than choose leaders from the sector
8)Choose your trading setup or pattern like Flags OR Triangles OR Cup and Handle OR Double Bottoms and Tops, etc

12/12 Please give your suggestion if I have missed out any points, or you have anything to share. I will keep sharing new strategies and trading ideas so hang on and keep following.