Q&A by Don Bright
Iíve been analyzing breakouts from consolidation and wanted to get your feedback about the viability of a strategy I was considering. I posted this on an Internet thread a while back and got no response, leading me to believe perhaps no one actually trades this way.
Yesterday, Pru started hitting the high ticker as it broke through the Hod and rallied to $22, where it then ranged between $21.75 and $21.99 for almost two hours before breaking through $22 and rapidly hitting $22.59 on the breakout.
When a stock consolidates midday and trades within a tight range, it will either break out of consolidation in the same direction as the earlier trend, or it will break down to reverse the trend. Have you any experience with placing two limit orders outside the trading range, assuming the one that gets filled places you in the direction of the breakout? So with Pru, you would place a short order at $21.70 and a long order at $22.05 and catch the ride when the big boys come out to play late in the day. Thanks in advance!