James Taulman
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Market Continues Higher – Several SetUp Types to Choose From

We got a pleasant surprise yesterday as the markets traded higher.

Just as last week’s pull back shifted the current rally to under pressure, stocks rebounded.

This morning the market opened higher.

As regular readers are aware, I have been featuring several different types of trading set ups in my morning report, over the past couple of months.

These have included both LONG and SHORT selections that fall under four types:

1) High Ranked Leaders Watch List (Longs)

These stocks are of highly-ranked, financially sound companies and have properly formed technical bases. These selections hail from the current leading groups of the market. They are profitable businesses with either a new product or service, new management or are making new highs in share price as institutions and big money managers are accumulating shares. This means that they have the winning characteristics which we are all looking for. These characteristics include such chart patterns as a cup with handle, flat base, double bottom base, etc. History has shown that when such stocks are posted as set ups, they are poised for a buyable breakout.

At the end of June I compiled a Mid-Year BreakOut Performance review on how the stocks from this watch list have performed for during the first half of the year. SEE HERE

2) Technical SetUps – BuyingBreakOuts.com (Longs and Shorts)

These stocks are more technically-based. Each may not have a solid fundamental history, but most are highly ranked. With these I am also watching for a breakout to new highs, for the LONGS.

For the shorts, I am watching for a break down usually out of a base where there is now considerable support immediately below. The support area becomes our point to COVER with a profit.

Here are all of the breakouts from this watch list for October. SEE HERE

3) TrendLine SetUps & BreakOuts (Longs)

These are more technically-based as well. Yet I am not looking for a break to new highs, I am watching for a break out of a downtrend. There is of course overhead supply or resistance, so these are a little tougher to deal with.

A few things I consider for these set ups.

When tracing out the downtrend, you need at least three points to define the trend.

The more points you can connect the better.

Also, having those points fairly evenly spaced adds significance as well. Connecting a point that may be too far back in history may not have as much relevance to today’s price action.

Another thing, since you are not buying a breakout to new highs, you need to watch for areas of resistance that may loom above your purchase price. These areas can include the 50 or 200-day moving averages or some previous price high or lows. These areas can halt any price progress. However, a break above – not only shows technical strength – but also turns that area into your support, which is nice.

Also, we can use the same trendline that was resistance before the breakout as support after a breakout.

In the event of a pullback, watch to see if shares hold or fall below that line. Just like with our traditional breakouts – say out of a flat base to new highs, we would not want to see a break back into the base.

4) Extended Stocks (Shorts)

The selections under this category have ran up usually in a bull phase of the market and have gotten very extended from support and from their trading averages. At the time I post them, they look ripe for a pullback and can be shorted on the first sign of weakness.

On the morning of November 11th, I published list of 21 stocks that I noted as being “too extended.” This was of course a list of extended stocks which were trading in an extended market. I then added three more stocks the following day, bringing the total to 24.

As of the close last week, 16 had significantly cracked from their highs including:


It has been a challenging environment to say the least, especially the later half of the year. We have not had many of the highest quality set ups which I prefer, such as those from the High Ranked Leaders Watch List. However, our other set ups and breakouts have done fairly well.

Also, within the last couple of weeks there have been more High Ranked Set Ups that I have been able to add, and the list has grown slightly from one or two a week to three or four. Maybe not much of an increase, although 100%. So, in order to get the quality breakouts which I prefer the most, they first need to be quality set ups.

Any questions or concerns, please email me directly at james@jamestaulman.com, as I would be glad to assist you.