The gap re-mount set-up, my favorite swing trade strategy, provides insight to extremely strong up-trend development following recent breakouts.

Strategy Summary

Swing traders must start by building a watch-list of growth stocks that have recently had strong breakout events. From there we observe the typical consolidation pattern that follows the breakout: high-tight flag, ascending triangle, symmetrical triangle, etc. Toward the beginning of this consolidation period, price will sometimes gap downward strongly – shaking out many of the momentum players. This gap will make for strong resistance as the sideways-ish pattern continues, with price mostly unable to rally above this area. When the triangle or other pattern comes to it’s apex, a spike on volume and a re-mount of this gap often forecasts a screaming rally that can last for weeks or even months! The risk/reward ratio of this trade is off the scale and the %win is pretty good too.

Sounds easy

Well, the strategy set-up is easy enough in theory, but is not easy to trade. First of all there is no instant gratification – and that is not too popular with today’s “System-a-Day-Sam” trading populous. Swing traders must start by looking at stocks that they may not be trading for weeks – if ever at all. Even when the set-up finally appears and calls for entry, when the results do not cooperate, traders become frustrated with the time spent on the trade only to be stopped out in a few hours of trading. Still, the set-up is not that hard to understand and can produce really fun “home run” trades especially during strong broad market conditions. Traders can trade the stocks in their watch-lists based on other trading strategies like the volume spike, the MACD fractal, the counter trend reversal, and other triangle strategies.

Swing Trading Skills

If you have read my other strategy guides, you probably have noticed that I’m always nagging about how important it is to improve your trading skills. This strategy is no different. If you are not a winning swing trader, I challenge you to get used to following a watch-list of stocks that qualify for this trade. Make it your intent to become an expert at observing how the consolidation pattern unfolds, figuring out where to find good swing trades to execute, -  then get really good at doing so. Do not get discouraged by short term results and stick to your strategies. You can do this.

• Building a watch-list for the Gap Re-mount Swing Trade Strategy Guide
• The typical down gap after a large breakout