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When an opportunity presents itself, a pattern that I love and have experience trading, I make sure that I am involved and take advantage of it!

After all, my job as a trader is to do just that.

This was the case on Monday.

I watched a stock with a consolidation heading into a breakout pattern, one of my favorite setups.

After recognizing the risk: reward and gaining the confirmation I needed, I entered the trade on Monday and closed the trade in three stages on Tuesday for a solid profit.

I made the trade in Active Health Foods (AHFD)

Before I go over the trade, let’s get some background on the stock.

What is AHFD?

According to Yahoo, Active Health Foods, Inc. develops and markets healthy foods and beverages in the United States. The company offers soft drinks, such as Active X Bars. The company was founded in 2008 and is based in Riverside, California.

According to Google Finance, the stock trades on the OTC Markets and has a market capitalization of 30.73M USD.

The Setup

The stock was previously on my watch list as it was nearing critical breakout levels.

On a higher time frame, on Monday, the stock cleared a significant resistance level at $0.0018. This signaled a major breakout and change of character on a higher time frame.

On Monday, the stock broke above that critical resistance level and then held firmly above. Significant resistance had now turned into support.

The stock traded over 2B shares on the day compared with the previous day’s volume of just 34M.

The consolidation leading to a breakout pattern had now been formed and confirmed.

The Trade

I entered the trade at $0.0019 late in the day on Monday.

I entered at that moment for several reasons. Firstly, the stock had spent time holding above previous resistance, a sign of strength. Secondly, volume increased in the stock late into the day, and the stock broke out of the intraday consolidation.

After the stock broke out of the intraday consolidation on Monday, it closed at the high signaling strength, and I was confident that it might gap higher and experience momentum.

On Tuesday, the stock experienced great continuation and volume. The impressive volume posted on Monday was followed by 2.2B shares being traded in the stock on Tuesday. 2 billion shares traded, two days in a row!

After gapping higher on Tuesday and trading higher, I closed my long position in three stages.

Stage 1: I sold at $0.0032, which represented a gain of 68.42%.

Stage 2: I sold at $0.0035, which represented a gain of 84.21%

Stage 3: I sold at $0.0042, which represented a gain of 121.05%

Of course, this is not an everyday occurrence. I don’t always find penny stocks that trade unusual volume for several days in a row or increase in share price as considerably as this stock did.

However, the consolidation breakout pattern is one that I see all the time in the market. As was the case with this trade, everything aligned perfectly as the volume, technical breakout, and intraday breakout all aligned, resulting in a great opportunity.

Author:
Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

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1 Comments

  1. Oh wow!!!! This was a great trade. I’m sure these are out there but you need to find them. I think I’ll need to research stocks closer.
    Thanks
    Peggy

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