Each day we publish a list of stocks that meet the requirements of a Cup and Handle Pattern as of the close for that day. The list is refreshed each day as stocks drop off the list and new ones are added. Some of the important data points published for each stock are its breakout price,close price, average volume, daily volume, etc. On the following day, we track the price of each stock and issue an alert both on the site and by email if the stock moves above its breakout price.
Those subscribers who can follow the market in real time can react to these alerts and trade according to their individual trading strategy. As a guide, we have developed a suggested trading strategy we call "Buy on Alert".
This is not feasible for many subscribers so I have developed a strategy for trading stocks that close above their breakout price on the day we issue the alert. We call it the "Buy at Open" strategy.
Both strategies can be categorized as "Swing Trading".
The biggest problem facing a trader is not what to buy, but when to
sell. The strategies solve this problem by providing specific
instructions for both what and how to buy, and when and how to sell. The
strategy also includes a portfolio management component.
Both strategies use a common portfolio management scheme.
Opening a Trade
Each day we analyze the alerts we issued that day on cup and handle pattern stocks looking for stocks that meet the Buy at Open Criteria:
If there are more than two stocks meeting the criteria(some days there may be none) we select the two that have the highest volume to average volume of those meeting the above criteria and publish them to subscribers by email. One or more of these these two stocks can be bought at the next day's open, assuming you do not already hold the maximum (2) positions.
To open a trade, place a 'stop market' order for the chosen stock at the breakout price of that stock for the previous day. This will ensure you do not buy the stock if the market price does not rise above the breakout price.
Closing a Trade
The strategy is based on backtest result from April, 2020 to 07/20/2020. The backtest gave a return of 17% with a maximum draw down of 9%. Average number of days held per trade was 4.9.
This strategy uses the same Portfolio Management techniques as described above.
Opening a Trade
To replicate the results of the Buy at Open backtest, you would buy the first two alerts (assuming you had positions available in the portfolio) that meet the following criteria:
As of July 20, 2020, the strategy earned 114% with a maximum drawdown of 7.3%.