The all-time high breakout is easily my favorite trading setup. Why
- Stock is trading at near or ATHs meaning the fundamental sentiment is good
- Stock is in an uptrend on bigger timeframes so momentum is favorable
- Up is the path of least resistance or there is no overhead resistance
What we want to see for this setup to work best:
- Bullish overall market, low VIX
- Above average sales and earnings growth: ultimate driver pushing prices higher
- Solid consolidation on the daily or weekly timeframes
- The bigger the base (consolidation), the bigger the breakout
- EMAs in numerical order on the 1D chart ideal to give it some momentum into the breakout
- Some type of catalyst
- Analyst upgrades
- Positive earnings report
Trading this setup subsequent to an earnings is my favorite setup, especially when the market comes during market hours as opposed to pre- or post-market. A catalyst plus an all-time high breakout give some of the most explosive moves you’ll see in the stock market.
Take a look at some of them below…
This AMD trade had a long between for about 10 months between 70 and 95-100 dollars per share leading into earnings. The day price crossed $95 was the first trading day following the report. AMD was set to gap-up, but it filled the gap and more at the open. Then volume came in pushing it through $95 which was out entry.
Despite the long consolidation period, notice how the EMA trend flipped leading into the ER breakout. This gave us technical momentum leading into the report. The earnings beat gave us fundamental momentum.
- Technical Momentum check
- Catalyst: Earnings beat check
- All-time high breakout check
- QQQ, SPY making highs check
This was a no-brainer trade. The consolidation is easier to see on the weekly chart shown below: