This particular momentum profile .33 BMI (Breakout Momentum Indicator) in only four days suggests strong momentum, and prices are trying to get somewhere soon. That was the case here, and all that we do now is apply our “Bellows Effect” cycle analysis to the consolidation zone to spot potential price squeeze zones.
This is marked by higher highs (HH’s) and higher lows (HL’s) after each swing cycle setup. When you spot these areas of progressively higher highs and higher lows AFTER a momentum signature has already been established, it creates a fertile breeding ground for explosive breakouts.
This is what we use over and over, day in and day out in the club to find high tension price squeeze stocks. Stocks that can allow stealth entry into a trade on the options. This can result in massive gains as ‘Delta’ begins to work in your favor as price advances due to lower implied volatility in these price congestion zones.
The trading system was originally created to identify stocks that have the potential for large extended moves based on momentum and these TSS stock cycles. The “extended moves" part was in my mind the crown jewel of trading and can allow for minimal ongoing involvement with a trade when the right stock was selected at the right time.
The “right time” remained a deep mystery to me for several years when I first entered the trading arena. Wanting to become a truly “serious” trader…in the late 1990’s for a year or so I carried around a clunky Quotrek machine which was popular back then and allowed me to get real time stock alerts and trade from anywhere.
Much has changed since then and carrying around an entire stock market database in a pocket sized cell phone is now possible.
Anyway, one of my big lessons about stock timing on both the trade entry and exit side was when a stock called Republic Industries, which was owned by the late Wayne Huzienga owner of the Florida Marlins and the Miami Dolphins football team, broke out for a nice double and settled into the $16 range.
The stock had caught my attention due to its stratospheric rise at the time, and using my knowledge of the Darvas system, I bought a nice stake in the company. A few weeks later the stock broke out and ran to the $41 range, doubling and then some my initial trading capital. I was all full of myself and super-impressed with my newfound stock trading skills.
The stock most certainly was primed to double again; all that I needed to do was wait and then to collect my profits.
Fast forward to a few weeks later, and the prices crumbled back to near my buy point for nearly a break-even trade. Defeated and chastened, I went back to the drawing board.
I should have known better when total strangers I ran into were talking about the stock.
That should have been my first clue. The general public is usually late to the game. This costly mistake (in lost profit) and pride because I hadn’t even followed, for example, the Darvas box rules in his book made me seriously reexamine my approach to trading.
I knew that if I were ever going to become a great trader I would have to learn charts like the back of my hand. Thus, my going on three decades involvement in the markets and reverse-engineering the market’s prime setups.
More specifically, my system was developed after a decades-long reverse-engineering of the biggest winning stocks of all time and consistently identifies stocks primed for explosive moves BEFORE they breakout. This does not guarantee that we will always find the very best stock at any given time but it puts the odds wayyy in our favor.
If you want to see for yourself how much you can learn about price action just by studying, go back and look at the weeks and months prior to the climax of a big stock trend. Oftentimes, you will see a conservative, low-risk entry deep inside the base consolidation, and once a trade was placed could be left alone for quite a while after a trade is placed, without obsessing over it. This was the basis for the development of our system, as we had no great desire to be chained to a computer watching every wiggle of the price on the screen.
As a trader, you probably realize that we bring our own individual baggage to our trading. Like many traders, some of my baggage included fear and greed. Fear of giving back money on a trade so as a result not staying with a trade long enough and the greed part wanting to stay in a trade WAYYY too long thinking that it will run forever. It is the constant yin and yang of the markets that we study religiously, so that we will hopefully not repeat the same mistake next time.
This impatience alone cost me over $700K in gains in just the past year. These weren’t losses-this was money left on the table by not letting a trade run or by missing the entry on obvious “high-scoring” trades due to distraction. It’s all part of trading. As traders, its imperative that we constantly work on and tweak our trading rules to improve on our results. This is one of the impetuses for re-opening the club to get more eyes on the plethora of stocks our system generates and miss far fewer of these trades.
Also, realize that we are experts at one thing when it comes to trading-how to find and trade big winning stocks. Beyond that, we have limited interest and experience in, for example, the yield curve on Treasury-Bonds, etc. It’s just not our bag-it’s NOISE and too much noise is an easy way to get stuck in paralysis of analysis.
We trade WHAT IS, not WHAT WE WANT IT TO BE.
About a decade after I dipped my toes seriously into trading, I teamed up with a trader named Daryl Thompson.
Now how I met Daryl was through a trading chat room that we both belonged to. I noticed that Daryl was posting many of the same stocks that I was trading, and I saw that our trading styles were similar, so I got in touch with him and learned that he was also inspired in a big way by Nicholas Darvas and as they say, the rest is history.
For much of the 1980’s Daryl had been working for a Houston billionaire using the skills he had developed to generate gains of 70% per year for the billionaire (Take that Warren Buffet lol).
We started our own trading club about fifteen years ago which we had opened for several years and then took a break for nearly the past decade as we both had a few twists and turns in our journey… Daryl with some health issues and I had a desire to revamp my entire trading system to make it much more agile in any market and so I spent several years applying these cycles to the futures and Forex markets.
Daryl is a master of candlestick trading. He was a partner in one of the top candlestick trading forums in the world. When he says “Back Up The Truck (BUTT)” you should listen to him. We both have our favorite type of setups. I especially like the “Millionaire Maker” Pattern (MM Pattern) for short. There are generally fewer than 5-10 of these prime setups in the market at any given time (out of 7000+ stocks). These are stocks capable of producing 100, 200, 300% gains or more in just a few months.
In just one month a couple of years ago, two of the trades that Daryl fed me, made me over $50K risking only about $3500 on each, so you can see how paying attention to the moderator’s picks can be quite fruitful.
So to summarize-what our trading club is and what it can help you do for your trading:
20 Things That Membership In The BKTC Club Will Do For Your Trading:
-We find the best stocks in the market based on decades of price action research and not only post what we find but show you how to find these on your own (this will slash the amount of time YOU need to be glued to the computer finding these on your own)
-Training on our proprietary momentum tools BMI & Vector…nobody else is teaching this
-Wholistic “Big Picture” stock selection tools
-How the MM Pattern (Millionaire Maker) may be the only trade you need to learn…this one trade epitomizes the best of the best stocks in the market and is capable of producing out-sized gains over and over
-Training on the hidden TSS cycles in the market
-How to use Cycle Adaptive Trend Lines (C.A.T. Lines) for “meat of the move” buy points and to avoid unproductive price consolidation zones
-How to use Cycle Adaptive Trend Channels for superior trade exit zones (something nobody else is teaching)
-What technical analysis tools really matter (the list is thin) for trading hi-performance stocks
-How to analyze price action pattern quality to avoid inferior trades
-How to use stock options to MAGNIFY your gains while lowering your risk
-How to spot unusual price tension in a stock that may lead to explosive 2-5+ day gap breakouts that dramatically increase the return on way-out-of-the-money (WOTM) options
-How to chain together a trade using these momentum based price squeezes to potentially turn a $158 investment into a $15,000 trade in just three months on two trades
-Learn how to avoid IPO “mania” until the opportune moment using the correct TSS Cycles to avoid your trading capital languishing unproductively oftentimes for a year or two
-What type of trades qualify as “swing for the fences” type trades that offer superior price performance due to superior short, intermediate and long-term cycles
-How a 1-day price event (Frilled Dragon) can telegraph explosive 100-200-300% gains in the weeks ahead and even multi-thousand percent gains like it did on DTG several years back
-How to spot the beginning stages of a new super-cycle (Deep Tube) forming…trades that are oftentimes 12-15 months long and can create 200-500%+ gains when they eventually climax
-How to project Stage 3 price performance based on how a stock performs in stage 1 of a super-cycle
-Why the TM-2 Cycle used in just the right place (a few days before earnings) on the right stocks can lead to HUGE gains on WOTM options
-How price zones (PPP Zones) can be used for trade signal entries when combined with TSS Cycle analysis.
-The ability to interact inside of the club with Paul Lemal and Daryl Thompson who have decades of experience with finding and trading the market’s biggest waves.
And much much more…
Let’s Rule The Freakin' Market’s Together!
Paul Lemal
Daryl Thompson
Big Kahuna Trading Club
