Trading with Aaron – Rounded Bottom Breakouts

DBB STSI

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Welcome to this edition of Trading with Aaron!

My newest candlestick pattern favorite is the rounded bottom breakout.

A couple that are working today are Star Scientific (NASDAQ: $STSI), Energy XXI (NASDAQ: $EXXI), and Acasti Pharma (NASDAQ: $ACST)  to name a few. Frankly, I’m still learning to spot these, but you can set up scans to spot them for you.

These are great because they have high gain potential.  I know we all love rounded bottoms and high gain potential!! My chart setup is this: 8EMA(AKA the T~line),  20SMA, 34EMA, 50SMA and the 200SMA.

EXXI

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The criteria for the breakout is that it needs to be in a down trend where the 20sma is below the 34ema, the 34ema is below the 50sma, and the 50sma is below the 200sma.

Then, you want the price action to come above the 50sma causing the 20sma, the 34ema and the 50sma to crossover to be on top of each other, from being below each other. 

Actual breakout is when the price, the 20sma, and the 34ema close above the 50sma. Usually, the price is the last one to close above the 50SMA. Now your target is the 200sma, which in a good downtrend, could be a very large move.

STSI rounded bottom breakout working today 2/24/14

ACST

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Hopefully, you can use these breakout$ to your advantage! Let me know when they are working for you.

Now, go make some money!

[Read: How to Become a Successful Stock Trader

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