Several times, starting in late March, I covered how O'Reilly Automotive (ORLY) was setting up for a possible breakout to the upside.
In the April 23rd, 2014 newsletter, I pointed out the recent gentle downtrend was being tested and a breakout may be imminent.
(chart from the 4/23/14 Seasonal Forecaster newsletter)
I also showed the strong seasonal pattern for ORLY at that time. The following 8-week period had an especially good track record:
ORLY has followed its historical track record nicely. It has been 11 weeks since the week of 4/21. The 11 week seasonal, on 4/21, showed a track record of an average 7.5% gain. Since the 4/23 newsletter, when ORLY opened at 148.34, it has gained as much as 5.0%. ORLY has been cycling upwards within a rather clearly defined uptrending channel.
But the game's not over. Take another look at the above chart. On Wednesday, ORLY set a new all-time closing high.
This is a setup for a high probability trade. It could be either a new long stock position, an addition to an existing position, or a bullishly-oriented option strategy.
One of the techniques for success professional traders employ is to buy stocks on breaks to new highs. Less experienced traders may be uncomfortable with this strategy.
William J. O'Neil is founder and chairman of Investor's Business Daily, and founder of William O'Neil and Company, a leader in equity market research. In his book, How to Make Money in Stocks, 4th edition. he states:
There is another fascinating phenomenon we found in the early stage of all winning stocks. We call it the “Great Paradox.”
Our study of the greatest stock market winners proved that the old adage “buy low, sell high” was completely wrong. In fact, our study proved the exact opposite. The hard-to-believe Great Paradox in the stock market is
What seems too high in price and risk to the majority usually goes higher eventually, and what seems low and cheap usually goes lower.
In other words, if a stock sets a new 52-week high, it is likely to set more highs.
I wrote an article about this strategy, based on a book published by a couple of Bill O'Neil's top traders. See Trading High Price Stocks And New Highs
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.
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