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Breakout Strategy/Screener

Screening software to identify stocks breaking out of consolidation.



HI everyone, in this video we quickly demonstrate our new Consolidation Breakout Scanner.

Breakout trading is a highly popular strategy, and often for good reason. Nicolas Darvas gained considerable popularity from using such a technique, now commonly referred to as the Darvas Box.

Breakout trading can come in a variety of forms, the approach I share in the group is in the form of a lateral consolidation breakout, simply due to its lateral movement of price consolidation, followed by a breakout.

Another version is referred to as a Flag Breakout. The Flag however is not top of my list, the previous price high can create another line of resistance to overcome.

I prefer lateral consolidation where there are little or often no signs of near-term upper resistance.

With that in mind lets look at our scanner.

In the members area you will see the button; Breakout Scanner. When you click on the button you will be presented with two further options; Shortlist and Filters.

If you select Filters, you can create the parameters required to show stocks you want to be presented with.

The first criterion is the consolidation period. Here we can select Days or Weeks, and in this example we are looking for a minimum consolidation period of six weeks.

Next we choose the maximum consolidation width, and on this occasion we enter 8%, based on the open and close price of each candle.

The scanner will therefore look for stocks which have a price volatility within an 8% range, for a minimum of six bars.

In addition to this, we only want the scanner to present stocks within a certain price breakout range. Here we select a minimum 5% change, up to a maximum 20% change from the candle open. In effect we want to see a breakout candle of between 5% and 20% moving out of consolidation.

We then choose to only look for Quality stocks; Return On Equity, Return On Capital and Operating Margin, these are the three main criteria I look for in that regard.

We also want these quality stocks breaking out of consolidation with a certain level of volume, here we are asking for a 10% volume increase on the previous week.

We also want an indication of a positive trend, here we are looking for stocks moving above the 20 week average with a positive Mack Dee.

Once we have all the criteria set, we click search and allow all the qualifying stocks to load.

Using the previous settings, we are presented with several charts like this, including price consolidation over a minimum of 6 weeks, within a range of no greater than 8%. In fact this chart had a price range of 4.96%, with a breakout price increase of 6.68%.

Volume was 16.38% higher than the previous week, price was above the 20 week moving average and the Mack Dee was positive.

With some minor changes to the filters, this would closely resemble a chart I would consider taking a position on, in which case I would click add to put the stock into my shortlist for further review.

The screener however would also present other charts meeting this filtering criteria, for example, in this chart we have a minimum 6 weeks of price consolidation, within the 8% maximum range, price is above the 20 week moving average and volume is 14.79% higher than the previous week. But, despite the price change of last week increasing by 6.79%, it has not broken out of consolidation, we therefore discount the chart and move on.

Hopefully traders applying a breakout strategy to the US markets will find this tool very useful indeed, saving hours of research.

Thanks for watching.

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3 commentaires

Alex Clark
Alex Clark
24 févr. 2023

Hi! I wanted to ask you what screen recording application you use. I also want to start making YouTube videos but can't choose an app. Do you think is a good option for macbook?


Sam A
Sam A
23 déc. 2021

Hi Gareth - look forward to trying out new screener. Q1 - Does the new screener provide the same outputs as the MIO (inc filters provided in your strategy)? Q2 - Would it be possible to cover ASX stocks also? Sam.

11 janv. 2022
En réponse à

Hi Sam - Yes within the next few days ASX will be included and we will not need to rely on MIO.

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