{"id":3362,"date":"2013-11-05T13:47:01","date_gmt":"2013-11-05T18:47:01","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=3362"},"modified":"2022-04-06T15:05:05","modified_gmt":"2022-04-06T19:05:05","slug":"breakout-stock-trade-slca","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/breakout-stock-trade-slca\/","title":{"rendered":"How We Traded The Breakout In Silica Stock For A 43% Gain ($SLCA)"},"content":{"rendered":"<figure id=\"attachment_3374\" aria-describedby=\"caption-attachment-3374\" style=\"width: 180px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-3374 \" alt=\"atari-breakout-game\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2013\/11\/atari-breakout-game-300x235.png\" width=\"180\" height=\"141\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/11\/atari-breakout-game-300x235.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/11\/atari-breakout-game-110x86.png 110w\" sizes=\"auto, (max-width: 180px) 100vw, 180px\" \/><figcaption id=\"caption-attachment-3374\" class=\"wp-caption-text\">Atari Breakout Game &#8211; Classic!<\/figcaption><\/figure>\n<p>In July 2013, we bought a breakout in <em>US Silica Holdings ($SLCA)<\/em>. Three months later, we sold the stock for an average share price gain of 43%.<\/p>\n<p>In this educational trading strategy article, we use <strong>six\u00a0annotated stock charts to walk you through the entire trade from beginning to end.<\/strong><\/p>\n<p>Upon finishing the article, you will see that a <em>winning breakout trading system does NOT need to be complicated<\/em>.<\/p>\n<p>You may even be surprised by how simple our breakout trading technique really is.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/breakout-stock-trade-slca\/#Nevermind_The_Pullbacks_Heres_The_Breakout\" >Nevermind The Pullbacks, Here&#8217;s The Breakout<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/breakout-stock-trade-slca\/#SLCA_%E2%80%93_Locked_And_Loaded\" >$SLCA &#8211; Locked And Loaded<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/breakout-stock-trade-slca\/#Show_Me_The_Money\" >Show Me The Money<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Nevermind_The_Pullbacks_Heres_The_Breakout\"><\/span>Nevermind The Pullbacks, Here&#8217;s The Breakout<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In a bull market, our momentum swing trading technique primarily focuses on trading both breakouts <em>and<\/em> pullbacks of leading small to mid-cap stocks.<\/p>\n<p>Depending on market conditions, these trade setups are then entered with a short to intermediate-term time horizon (one week to several months).<\/p>\n<p>Since our last several trade review articles detailed <a title=\"How To Buy The Best Breakout Stocks On A Pullback\" href=\"https:\/\/www.morpheustrading.com\/blog\/how-to-buy-breakouts-pulling-back\/\" target=\"_blank\" rel=\"noopener\">our strategy for buying pullbacks<\/a>, it is now\u00a0<strong>time to recap an actual breakout trade.<\/strong><\/p>\n<p>Below is a\u00a0<em>weekly<\/em> chart of $SLCA that shows the pattern that had developed just before our initial buy entry:<\/p>\n<p><img decoding=\"async\" title=\"The breakout setup in $SLCA\" alt=\"$SLCA poised for breakout\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA6.png\" \/><\/p>\n<p>After launching as an IPO in February 2012, $SLCA rose to the $22 area a month later, then sold off sharply.<\/p>\n<p>As you can see on the chart above, the stock hit bottom in July 2012, then reversed and rallied back to test its prior high in February 2013.<\/p>\n<p>When the price subsequently broke out to a new all-time high in the first week of March (as labeled on the chart), volume immediately spiked higher.<\/p>\n<p><strong>The volume surge was bullish, and confirmed the breakout<\/strong> was backed by the presence of <a title=\"Learn About Accumulation\" href=\"https:\/\/education.investors.com\/investors-corner\/650244-use-accumulation-to-gauge-institutional-demand.htm\" target=\"_blank\" rel=\"noopener\">institutional accumulation<\/a>.<\/p>\n<p>Furthermore, the institutional buying was supported by the fact that $SLCA was also exhibiting strong earnings growth.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"SLCA_%E2%80%93_Locked_And_Loaded\"><\/span>$SLCA &#8211; Locked And Loaded<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>After the big breakout in March, the price pulled back for several months, then began building a constructive base of consolidation during that time (<a title=\"How To Find The Best Stocks To Buy Before They Breakout\" href=\"https:\/\/www.morpheustrading.com\/blog\/best-stock-breakouts\/\" target=\"_blank\" rel=\"noopener\">click here<\/a> to see exactly what represents proper basing action).<\/p>\n<p>As the price action began tightening up within the base, it created a downtrend line off the March high.<\/p>\n<p>At this point, the weekly chart was showing a<strong> chart pattern <em>similar<\/em> to a bullish &#8220;cup and handle.&#8221;<\/strong><\/p>\n<p>It was at this point that we added $SLCA to our <strong><a title=\"The Wagner Daily stock picking newsletter\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>Wagner Daily<\/em><\/a><\/strong> watchlist and began stalking it for potential buy entry on a base breakout.<\/p>\n<p>Drilling down to the shorter-term daily chart interval, here is our initial buy entry on July 8:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"First buy entry into $SLCA\" alt=\"$SLCA buying the breakout\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA1.png\" width=\"732\" height=\"640\" \/><\/p>\n<p>$SLCA established a higher swing low in June, and the next pullback held support of that low. Higher lows within a base is a bullish sign.<\/p>\n<p>Our initial buy entry came after the price broke out above the downtrend line, then confirmed that move by pushing back above its 50 day moving average.<\/p>\n<p>The next chart (same time interval) shows we added shares to the initial position on August 14.<\/p>\n<p>We commonly scale in to stock trades whenever the holding period is expected to be intermediate-term:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"Second buy entry into $SLCA\" alt=\"Scaling into $SLCA breakout setup\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA2.png\" width=\"732\" height=\"640\" \/><\/p>\n<p>A few weeks prior to adding shares on August 14, $SLCA underwent a false breakout that was triggered by a negative, knee-jerk reaction to an earnings report.<\/p>\n<p>However, after selling off from the false breakout, the price definitively found key support at the 50-day moving average.<\/p>\n<p>Since banks, mutual funds, hedge funds, and other <strong>institutions commonly buy pullbacks to the 50-day moving averages in leading stocks,<\/strong> it&#8217;s not surprising that the price decline was limited.<\/p>\n<p>As the stock came into support of its 50-day moving average, one could have added to the position at that level with relatively low risk (though we did not).<\/p>\n<p>Once $SLCA began climbing away from its 50-day MA again, it paused for a few days and we added to our position when the price rallied above the two-day high of August 12 &amp; 13.<\/p>\n<p>For the added shares only, we set a protective stop below convergence of the 50-day moving average and prior swing low (stop on original shares remained lower).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Show_Me_The_Money\"><\/span>Show Me The Money<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Fast forwarding about two months, let&#8217;s take a look at where and how we <a title=\"What Is Scaling Out?\" href=\"https:\/\/www.investopedia.com\/terms\/s\/scale-out.asp\" target=\"_blank\" rel=\"noopener\">scaled out<\/a> of the trade for a large profit:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"First sell of $SLCA stock\" alt=\"Taking profits on $SLCA stock trade\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA3.png\" width=\"732\" height=\"640\" \/><\/p>\n<p>In October, $SLCA really began heating up, as the price broke out to another fresh, all-time high and volume surged again.<\/p>\n<p>Owing to a complete lack of overhead price resistance, momentum kicked into high gear and shoved $SLCA more than 30% higher in the first two weeks of the month.<\/p>\n<p>After the stock rallied to an unrealized price gain of more than 30% from our most recent entry, we trailed a tight stop on 1\/4 of the position size, in order to <em>protect gains in case of a sudden pullback.<\/em><\/p>\n<p>On October 17, that tightened stop got triggered when the price fell below the prior day&#8217;s low (quite a volatile intraday session).<\/p>\n<p>We <strong>sold the first 1\/4 of our total shares for a gain of 37%<\/strong> (from the most recent entry).<\/p>\n<p>Five days later, we sold another 1\/4 of the position, as shown on the daily chart below:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"Second exit in $SLCA\" alt=\"Scaling out of $SLCA breakout trade\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA4.png\" width=\"732\" height=\"640\" \/> &#8211;<\/p>\n<p>We continued trailing a tight stop on another 1\/4 of the position, rather than selling those shares, just in case the pullback turned out to be very short-lived and the stock broke out to new highs again.<\/p>\n<p>But the stock decided it was time for a breather instead.<\/p>\n<p>$SLCA hit our stop for the second 1\/4 of the position on the open of October 24, after stalling at the $35 area for the second time.<\/p>\n<p>This enabled us to <strong>score a 33% gain on the second quarter position<\/strong> we sold.<\/p>\n<p>Finally, we sold the remaining half of the position four days later:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"Selling final shares of $SLCA for 50% gain\" alt=\"Sold $SLCA for 50% gain with final shares\" src=\"https:\/\/www.morpheustrading.com\/~rick\/charts\/2013\/131104SLCA5.png\" width=\"732\" height=\"640\" \/><\/p>\n<p>Although we liked the late October bounce off near-term support of the 20-day exponential moving average (beige line), the price began rolling over on October 30.<\/p>\n<p>Since $SLCA was scheduled to report its next quarterly earnings that evening, we made the decision to take the profits off the table that day.<\/p>\n<p>We <strong>locked in a very amiable gain of 50%<\/strong> (from the original entry point) on the remaining half position, rather than hold the stock through earnings.<\/p>\n<p>Averaging together the two different entry points and three scaled exit points, this intermediate-term momentum swing trade in $SLCA added up to an <strong>average gain of 43%, with a total holding period of just over 3 months.<\/strong><\/p>\n<p><em>Don&#8217;t miss the next big winning stock pick we hand to subscribers of our nightly swing trading newsletter. <a title=\"The Wagner Daily sign up\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><strong>Get started now<\/strong><\/a> with your 30-day risk-free subscription to The Wagner Daily.<\/em><\/p>\n<div class=\"cfmonitor\"><center><script type=\"text\/javascript\" src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\"><\/script><!-- Footer of content --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 300px; height: 250px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"7002222565\"><\/ins><script type=\"text\/javascript\">\/\/ <![CDATA[\n(adsbygoogle = window.adsbygoogle || []).push({});\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>In July 2013, we bought a breakout in US Silica Holdings ($SLCA). Three months later, we sold the stock for an average share price gain of 43%. In this educational trading strategy article, we use six\u00a0annotated stock charts to walk you through the entire trade from beginning to end. Upon finishing the article, you will [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-3362","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3362","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=3362"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3362\/revisions"}],"predecessor-version":[{"id":11356,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3362\/revisions\/11356"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=3362"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=3362"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=3362"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}