Secondary Entries and Double Bottoms
A couple weeks ago we featured LGIH in another explosive bottoming pattern just before a 2nd 10% move higher from the ideal technical entry point.
Again, the stock made the 10% run from our technical entry point after being featured in the Weekly and Daily Alert and without pulling back more than 3.5% below our entry point listed in the alerts.
In both cases, the first target was reached within 3 trading days.
Many explosive bottoming patterns just hit the first 4% to 10% profit target within a few days and then pull back below the entry point. Other setups, especially on top growth stocks, soar in the weeks ahead.
After hitting the first target, we take some profits and stop the remainder a little below the ideal technical entry point as explained in the course.
So the explosive bottoming pattern is a short-term swing trading setup that can also lead to a big winner.
If it gets off to a strong start, you can keep a large portion of the initial position for a potential big move like we saw with LITE, HTHT and ALGN recently out of this technical pattern.
When swing trading, the important thing is that you get a great technical entry point where you can have a trade with a very high success rate while using a tight stop-loss.
This allows traders to take a larger position size while still adhering to their risk management rules. This is a key to success long-term when trading stocks.
After this initial move out of the explosive bottoming pattern you often see a very popular technical pattern called the double bottom develop.
The explosive bottoming pattern often leads to a big initial surge followed by a test of that low on a daily chart. On a top growth stock or UPOD stock within a strong, long-term uptrend ideally.
If you see a higher high after another low around the same level on a daily chart, the pattern is confirmed and the entry point is reached.
If the stock makes a higher low than a higher high then we have a trend change confirmation back to the upside which is about as bullish to us. This is often referred to as a 1-2-3 trend change.
After hitting the first target listed in the alerts a second time, LGIH just broke out of the double bottom and regained the 50 day moving average. Again, many explosive bottoming patterns just hit the first 4% to 10% profit target within a few days and then pull back below the entry point.
Other setups, especially on top growth stocks, soar in the weeks ahead.
If we miss the entry point on the double bottom or trend change confirmation, we then watch for a secondary entry. The first pullback, if well-formed, can lead to a great second opportunity to catch a great technical entry point on a top growth stock.
This may materialize on LGIH in the days ahead. Stay tuned.
An explosive bottoming setup followed by a double bottom breakout on strong volume. It can be a great technical one-two punch to potentially greatly add to your initial profits after nailing a quality bottoming pattern within a strong, long-term uptrend.
Over the past year, we mentioned RH, ALGN, HTHT to customers in these bottoming patterns before they soared 25% to 80% or more within a few weeks.
In our explosive bottoming videos, we talk more about when we take the final portion of our position off. Nailing a great entry point is important but knowing when and how to sell is even more important.