Today, we’ll be looking at three different ways to find hot stocks that are ready to break out, especially for option traders. Let’s get started by exploring some charting methods using the TC2000 platform, which I personally use. If you want more details, check out our website at Tradersfly.com under the resources page, where you’ll also find some useful classes.
1. Volume
The first method involves looking at volume, which measures the number of shares traded during a certain period (day, week, month, etc.). On this platform, you can see volume at the bottom section of the chart. Higher volume usually means more action, like fuel for a car. If you see volume increasing along with rising prices, it might signal a good time to enter a bullish trade (vertical spreads, calendar spreads, etc.).
On the other hand, high volume during a price drop indicates heavy selling, which could be a cue for bearish trades.
I use Volume Buzz in TC2000 to quickly see which stocks are trading significantly more than usual. If you don’t have Volume Buzz, you can set up an indicator to show when a stock is trading 20% above its 20-day moving average of volume, allowing you to spot breakout opportunities.
2. Moving Averages
Another useful method is monitoring moving averages, which smooth out price data over a specific period. In this chart, I’m using the 10-day and 34-day exponential moving averages. The idea is to look for crossovers. For example, when the 10-day crosses above the 34-day, that could be an entry point. I’ve set my platform to color-code the candles white for an uptrend and yellow for a potential exit.
The key is to wait for crossovers and use them as signals for when to enter or exit trades. It’s not a foolproof strategy, but it’s a good way to identify trending stocks and take advantage of market movements.
3. Social Media & Trends
The third method is using social media and trends to gauge what’s hot. Platforms like StockTwits can show which stocks are being talked about the most. Popular stocks often experience high trading volumes, which can lead to price swings.
For example, if you see JPMorgan or Bed Bath & Beyond trending, it means people are talking about them, and it might be a good time to set up a spread.
Google Trends is another great tool for this. By searching terms like “stock” or “stock analysis,” you can see which companies are being searched the most. Stocks like Tesla, AMC, and Amazon often appear at the top, but rising searches like WBD or Shopify might indicate emerging trends.
It’s important to combine this buzz with liquidity. For options traders, you want stocks with high liquidity (weekly options available), like QQQ, to ensure smooth trades. Illiquid stocks can make it harder to get in or out of trades.
Conclusion
These are just a few strategies to help you find hot stocks ready to break out. As always, consider the patterns, moving averages, and volume to fine-tune your strategy. Feel free to adjust these ideas to suit your own trading style.
Thanks for joining me today! Don’t forget to check out our live classes at Tradersfly.com—the link will be in the description. See you in the next video!
