Today, we're going to talk about how
to find stocks before
they break out.
And I want to show you exactly how to
do this in five minutes
or less.
Let's get started. [MUSIC]
If you're trading stocks
or maybe even options,
one of the questions that I receive
all the time is "how do you find stocks
before they break
out." Because that's where we want,
right? We want to see a stock that is sky
rocketing up.
So, let me show you how I personally
do it. Now if you have been following me for
a while, you already know that I do not
trust any of the fundamentals
or the news
or any newsletters.
I rely on my own research
and in order to find stocks
that are ready to break out,
and make a nice move,
I like to use indicators.
So, let's jump over to the charts
and let me show you exactly
what I do.
Here we have a chart of Wayfair.
Actually, let's go to Apple because
it seems that everybody's interested in
Apple. Apple,
interestingly enough...
I mean, as you know,
over the past few months,
got hammered here.
So, it went all the way down
and the question is when is
Apple a good buy again?
When is it ready to go up to the upside?
Now here's what I'd like to do.
I like to use three indicators
to help me whether a stock
is more likely to go up,
down, or sideways,
and when I say more likely,
that's exactly what I mean because we
never know what a stock
will do. We can just put the odds
in our favor.
Now I like to use three indicators
that I plugged right underneath my charts.
So, one of the indicators is the RSI
and I want to see is the RSI
above 50
or not.
When the RSI is above 50,
this is when it is more likely for
the stock to go up.
Now, one indicator is good.
If one indicator is good,
what's better than one indicator?
Two indicators.
So, I also like to look at the Stochastics
and I want to see that the Stochastics are
above 50.
The last indicator that I like to use
is the MACD.
And when I'm looking at the MACD,
I want to see that the purple
line is above the orange line.
When all three indicators
are showing me these conditions for the
first time, this is
when a stock is more likely to continue
to go up. So, let's take a look at Apple here.
As you can see,
right here,
probably on January 15th.
On January 15th,
you will see that the RSI is
above 50.
You'll see that the Stochastics is about 50
and that the MACD,
the purple line is
above the orange line which is
its moving average.
On this day, the price was
at around $153. And
this would be the time when Apple
is ready to move up.
When you see this,
you could have bought Apple here,
and now it moved up from
$153, as you can see,
to $170.
As long as all these three indicators
are true, Apple is more likely
to continue to go up.
How long?
Until you see one of the indicators
moving in the other direction,
meaning when you see the RSI going below
50, or when you see the
Stochastics going below 50,
or when you see that the
purple line is going below the
orange line, so the MACD is going below
it's moving average... this is when it is
usually time to sell because
the stock is now more likely
to just go sideways
or might even turn around.
We have a minute left.
So, let me show you another example here.
Wayfair.
So, this is another stock where you see...
Okay...
When exactly was it for the first time
that the RSI is above 50?
The first time that you see that the
Stochastics is above 50
and that the MACD is above
its moving average,
meaning that the purple line is above
the orange line.
And you see, this happened right
here.
Right here, this means that now the
stock is more likely to go up.
This is when Wayfair was at
$98. As you can see,
right now,
it is at $120.92.
So, a nice move up of $20
or approximately 20%.
Now, how long will Wayfair
to continue to go up?
As long as these three indicators
are true, we should be fine,
but as soon as you see that the
RSI is going below 50,
or Stochastics
are going below 50,
or you see the purple line
going below the orange line.
This is when you know that the market is now,
or the stock is more likely to go
sideways
or even might turn around.
There we go.
This is how I see,
or I determine whether a stock
is more likely to go up,
down, or sideways based
on indicators
and this is how I find stocks
before they break out.
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