A system used to take advantage of assets that are in the middle of an intermediate uptrend or advancing phase. The objective is to find periods of temporary weakness or pauses within a trend that can be used to initiate positions. Positions are held from days to weeks with the goal of accumulation of numerous small profits.
Blue Sky breakouts are different from coils since this set-up remains above the 20-day EMA and have not completed the 6-week time requirement. Support and resistance lines can be observed when zooming in to hourly charts. This set-up usually appears in strong bull or momentum markets. Confine stock picking in sectors or markets demonstrating strength.
Set-up: Price has to be at least 6-month high, preferably ATH Consolidation which lasts for 2 weeks (maximum of 4 weeks) and has to be above the 20-day EMA. Almost no price retracement.
Trigger: MACD crossing up indicating momentum on price accelaration
Execution: Break of pattern resistance with strong impulsive break out candles supported by above average volume
Management: Price Targets set through Fibonacci Extension If price retraces and hits stop loss point, set-up may be turning into a coil and may need more time to complete.