Last Monday, five stocks on my list broke out on the same day.
This pattern works in market selloffs.
I love seeing that. After the selloff we’ve had, it looked like buyers were finally back.
All five stocks closed above the price I’d marked, and that’s what I want to see.
Then most of them gave it all back. By Thursday’s close, four were under the prices they’d broken out over.
I’ve bought plenty of breakouts that did the same thing to me. Maybe you bought one of these…
If you did, you were probably losing money by the next day’s close. All four closed lower on Tuesday than they had on Monday.
I keep watching for breakouts anyway, because of what the fifth name on my list did. Two days after the breakout, it closed more than 30% above my price.
Tomorrow it runs into earnings from NVIDIA Corporation (NASDAQ: NVDA). It’s Nvidia’s first report since CEO Jensen Huang resigned last week, and the name that held is going to move on it.
I have one price marked on the breakout that held. I want to see where it closes against that price after Nvidia reports.
Here’s the one name held and the price I’m watching.
Breakouts have had a rough year. A lot of the charts I’ve liked either couldn’t break out at all or broke out and gave the whole move back.
So I treat a breakout and a breakout that holds as two different things.
One close above my price isn’t enough for me. I want a stock to get above it and stay there.
Five stocks on my list broke out last Monday, and four of them are back under my price. Here’s how long each of the four lasted:
- Moderna, Inc. (NASDAQ: MRNA) closed above $255 on Monday and back under it on Tuesday.
- Quantum Computing Inc. (NASDAQ: QUBT) closed above $6.43 on Monday and back under it on Tuesday.
- Nebius Group N.V. (NASDAQ: NBIS) closed above $140 on Monday and back under it on Tuesday.
- IonQ, Inc. (NYSE: IONQ) closed above $32.62 on Monday and stayed above it until Thursday.
Moderna and Quantum Computing kept falling after Tuesday. By Thursday’s close, each one was more than 9% below the price it had broken out over.
Nebius got back above $140 on Wednesday. On Thursday, it reported earnings and opened more than 22% lower.
The one that held is Direxion Daily Semiconductor Bull 3X Shares (NYSE Arca: SOXL), a fund built to move 3x as much as the chip stocks.
SOXL was coming off a crash. It closed above $73 on November 3 and traded as low as $40.59 two days later. $50 was the price I wanted it to take back.
Last Monday, SOXL opened under $50 and closed at $56.20.
SOXL stayed above $50 on Tuesday. On Wednesday, it jumped again and closed more than 30% above that price. It’s closed above $50 every day since.
The test comes tomorrow, when Nvidia reports earnings after the close. It’s the company’s first report since its CEO resigned on Thursday.
Nvidia is one of the stocks inside SOXL, so the fund is going to move on that report.
$50 is the price I’m watching. If SOXL is still above $50 after Nvidia reports, it’ll have held that price for more than a week. If SOXL closes back under $50, it’s one more breakout that didn’t last.
Nebius is still the stock I want to own most. It closed above $140 twice last week and couldn’t stay there either time. I want it back above $140 for more than a day before I do anything.
If a stock you’re watching closes above your price today, check tomorrow’s close before you call it a breakout.
Matt Monaco is a world class trader, and a good friend of mine. We both started out as students of Tim Sykes back in the day.
Matt trades one pattern above all the others. He says it’s worked more than 80% of the time going back 25 years.
On Wednesday at 11 AM ET, he’s showing exactly how he trades it, live and free.
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results