Anatomy of a Breakout: The Catapult ORB

On Thursday, I alerted subscribers to take COUP long on a swing on the private Hit & Run Twitter feed.

Here’s the set up:

1) COUP was 6 months from entering a wide and loose consolidation phase.

Stocks often show turning points at 90 degree decrements from prior highs/lows.

2) COUP presented as a Diamond formation/base

3) On Thursday COUP came out… triggering a Rule of 4 Buy signal — a breakout above a 3 point trendline.

After initiating the position on Thursday, COUP gapped down with the market on Friday morning following the strike on Iran’s general.

Prior to the open we lowered our stop so we weren’t hit on the open.

Stocks often make 1st hour lows (and highs) and that’s exactly what happened with COUP.

I know from Bill O’Neil that about 50% of the time stocks that breakout quickly backtest their breakout point.

COUP did so on Friday morning.

When a stock has Bleedback into the prior days range and then triggers an Opening Range Breakout (ORB) after pulling the rubber band back, I refer to this as a Catapult ORB.

It often leads to powerful trend days and sometimes powerful trends.

COUP was a canary for the software sector with my 4 Horsemen, TWLOMDB and OKTA and COUP outperforming today.