Breakout rules that wait for volume and liquidity

A nightly scan, not a day-trading book

The archive records a scan-and-filter procedure that had been in use since 1998 and was run after hours rather than as a day-trading book. The breakout system entered only after price left a defined base or trend condition, held only while a moving-average stack remained intact, and treated abstention as an explicit third outcome when the market was not in that regime.

The regime gate

The long-side scan required price above the 50-day average and that 50-day average above the 200-day average. The short-side scan reversed both conditions.

New long scans were acted on only after a regime gate on the indexes: the same 50-day-above-200-day stack, plus a follow-through day. Failed rally attempts with empty scans and low-volume, low-priced names were treated as no-bottom signals.

When indexes were trendless, the prescribed action was to hold cash rather than force entries. That cash stance is the procedure's abstention rule.

Volume confirmation on the breakout

Breakout entries were taken from double bottoms, cups, and cup-with-handle patterns after a prior uptrend. They were preferred only when the breakout day showed heavy volume.

Volume confirmation required breakout-day volume to exceed the 50-day volume average. Far-above-average volume was treated as evidence of major accumulation. If breakout volume was not heavy, the procedure still required a strong green-to-max-green Balance of Power reading as a substitute accumulation signal.

The liquidity filter

The liquidity filter rejected names with average volume under 50,000 shares as too illiquid. A single earnings miss in those names could produce a large gap loss, and typical daily volume was treated as too thin to absorb that event without a large gap.

Exits after the close

Stops were not left resting on the book. Exits were reviewed after the close when holdings showed heavy-volume selling or a breakdown, because intraday dips in bull markets often reversed by the close.

After a 100% gain, the final sell rule was a break of the 200-day moving average. Otherwise the intended hold could extend toward a 12-month horizon while price stayed above the 50-day average.