From July 11th – Aug 11th we have had a total of 7 stocks break out from our daily Stock WatchList Morning Update.

That report is emailed out each market morning before the open. It contains my watch list of high-ranked, fundamentally sound stocks that are setting up in bullish technical bases of consolidation, and which looked poised to breakout.

For each stock in that watch list, I set specific “trading criteria”, including a TRIGGER PRICE. If a stock breaks out above its TRIGGER PRICE, I issue a BreakOut Alert to all subscribers via email. Stocks which trigger BreakOut Alerts are considered BUYs, and then are moved into the PORTFOLIO where each is monitored for SELL signals.

SEE: DAY 1 | DAY 2

DAY 3: Continue to Follow the System

At this point, let’s assume that you have been following these steps.

You…

1. Built a watch list of high-ranked, fundamentally sound leaders, which are carving out bullish technical bases of consolidation.
2. Had a stock breakout from that watch list and trigger your buy signal.
3. Updated your trading criteria for the BUY, as discussed yesterday. Meaning you have noted – 1st SUPPORT, 2nd SUPPORT and MAX LOSS GUIDE.

Now, continue monitoring the stocks in your portfolio by checking their “Vitals” throughout the day, and noting them.

 

The first thing you want to watch out for are any declines coupled with an increase in volume. This could happen the very next day after a stock breaks out.

If it doesn’t, it could or I should say – eventually will happen. Now, one such day (noted as -p%/+v%) does not trigger a sell signal.

However, a continuation of above average volume down days is a sign of distribution.

In any case, any such weakness should be negated with a solid up day (+p%/+v%).

Next, watch for any signs that your stocks may start to become vulnerable.

This could be if one makes a sharp advance, gets too extended by being well above support, and continues advancing with a lack of volume behind the move.

In this case, the stock is ripe for a pullback which could be triggered by a NEGATIVE REVERSAL where shares start the day higher, then reversal and close with a loss. If this happens, especially with volume, watch your holding closely the next day. It could be the start of at least a moderate decline that could lead to a test of support.

Continue to use basic technical analysis to keep an eye on each stock and how it behaves as it nears your noted 1st and 2nd support areas and see if it holds or breaks below.

A close definitively below a support area is a clear sell signal.

Every BreakOut We Have Had From the Stock WatchList Morning Update – The Past 31 Days

Below are the 7 stocks which broke out from my Technical SetUps WatchList, which is included in the Stock WatchList Morning Update, over the 31 day period from 7/11 – 8/11.

If you bought any of these, or just want to learn more about how my investing system works, please do yourself a favor and take a few minutes to continue to read this concise yet informative and even educational report.

SYMBOL	LAST	ADDED TO WATCH LIST	BREAKOUT DATE	BREAKOUT PRICE	CURRENT % PROFIT/LOSS
YNDX	$23.35	08-03-16	08-11-16	$ 23.31	+0.17%
CDK	$58.34	08-01-16	08-03-16	$ 58.27	+0.12%
PCTY	$45.36	08-03-16	08-03-16	$ 45.99	-1.37%
CDW	$45.59	08-01-16	08-03-16	$ 43.22	+3.17%
BMCH	$20.19	07-20-16	07-25-16	$ 20.09	+0.50%
IEX	$92.46	07-20-16	07-20-16	$ 87.28	+5.93%
EBIX	$56.30	06-14-16	07-11-16	$ 50.03	+12.53%

 *prices and %P/L as of Tuesday’s (8/16) close.

Below is a detailed update of the third breakout we had between July 11th – Aug 11th which occurred on July 25th.

I will update the remaining four breakouts, one each day this week, as part of this 7-part series. SEE DAY 1 | DAY 2

Also included will be a daily brief summary lesson from my 7-Day Comprehensive Study Course.

Today, I talked about using some basic technical analysis to monitor your holdings. (above) This comes from my “3 Pillars of Analysis” Technical, Fundamentals and Ranks. (see slide from my workshop above) I will cover Fundamentals tomorrow (Thursday). Of course, I go into much more detail in my 7-Day Comprehensive Study Course here.

#3 BMC Stock Holdings, Inc. (BMCH – Nasdaq)

BMC Stock Holdings, Inc. operates as lumber and building materials distributor and solutions provider in the United States.

This selection was added to the Technical SetUps WatchList and emailed out in the Stock WatchList Morning Update on the morning of 7/20.

At that time, shares were building a base near recent highs, while the stock’s ranks and fundamentals were solid.

I set my TRIGGER PRICE at $20.09 which was 10 cents above the high made on 6/7.

On 7/25 shares broke out and traded above there with a +55% increase in volume, and triggered a technical BUY signal.

SYMBOL	LAST	ADDED TO WATCH LIST	BREAKOUT DATE	BREAKOUT PRICE
BMCH	$20.19	07-20-16	07-25-16	$20.09

1st SUPPORT	2nd SUPPORT	MAX STOP LOSS GUIDE	EARNINGS	CURRENT % GAIN/LOSS
$19.50	50 DMA	$18.48	08-08-16	+0.50%

Charts courtesy of StockCharts.com

There were some modest gains made the very next day, yet without any meaningful volume.

If a stock (1) breaks out above previous resistance, (2) trades to new highs with a sharp increase in volume, (3) closes that session at the day’s highs and an all-time high – there is a strong possibility for increased demand at the open the following day. I’m not saying BMCH did or had any of these qualities when it broke out, as it didn’t. I’m just giving an example of an ideal breakout and the likely potential of a strong follow-through the next day as demand at that point is high, while supply is low.

Shares of BMCH did hold on to their breakout gains for the remainder of the first week, and held above initial support. With these breakouts, that support is always the previous highs of the base – see the blue line on the chart above.

This has basically been the case, with this holding except for on 8/4 and 8/15 when there was a very brief dip below the 50-day moving average for about 3 mins each day, which is no real concern. May have even been a misprint or some erroneous data on the 4th. On the 15th the company just completed a secondary offering.

There was a gap up as the company released its Q2 earnings announcement on 8/8, with numbers that came in well above our guidelines as management reported a +68% increase in earnings and a +123% increase in sales over the same quarter a year ago. Annual earnings are expected to come in with +102% increase for 2016. So, fundamentals – check.

As always, the stock’s price/volume action supersedes everything else.

Shares are currently above 1st SUPPORT, though a test of 2nd SUPPORT of the 50-day moving average looks very likely. This is perfectly fine and actually healthy if shares bounce from there and trade up. You can consider this a way of shaking out any “loose hands”, and now the stock can more easily move higher.

We can not nor do not, predict. If this does not become the case, and instead shares break below the 50-day moving average ($19.04), that would be the final sell signal. There is no support below there until the 200-day moving average which is about -17% from Tuesday’s close.

This is how you can do it.

Want to start receiving my morning watch list of high-ranked, fundamentally sound leaders which are setting up in bullish technical bases like these stocks ?

Then sign up today for my – Stock WatchList Morning Update – here.

If anyone needs any additional information, please let me known, as I would be glad to assist you.

Have Any Questions or Concerns ?

If you would like to schedule a phone appointment with me to answer any questions, address any concerns, or discuss the services I offer for self-directed investors, you can do so by using my appointment setter program here.

I talk to investors and traders on a regular basis, and I am always glad to help.

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