How to Use Ghost Lines and the Side Door Entry To Capture Explosive Moves

Oftentimes hot money momentum traders will load up on a stock on strength on the runoff, carrying it over in anticipation of a pop the next morning.

Consequently, an initial bout of profit taking can lead to an early shakeout.

This is what occurred in OTRK, which was a long idea from the Hit & Run weekend report (January 18).

The long setup was based on an anticipation of a Rule of 4 Breakout — a breakout over a 3 point trendline… underscored by a 180 buy signal.

In other words, OTRK closed at/near session highs the prior trading day following a close at/near session lows the previous session.

The Rule of 4 pattern mirrored a larger Rule of 4 Breakout that led to a test of all-time highs at 80.

Self-similar patterns or fractals is a strategy that I often use to profit from when selecting stock ideas.

The presumption was upside follow through would see OTRK magnetized toward the 80 region.

Notice that the prior swing low near 60 was a successful backtest of a Ghostline extended from the prior Rule of 4 Breakout.

As well, the last swing low successfully tested OTRK’s 50 day line.

Taken together, with the benefit of Friday’s 180 buy setup, OTRK presented a solid risk to reward buy.

However, as offered above, often overnight hot-money longs will lock in gains quickly causing Whiplash.

The following 10 minute OTRK shows a gap up open A followed by a pullback into the open gap B and an Opening Range Breakout (ORB) C.

An ORB is a breakout over the 1st half hour’s range.

The quick pullback into support/or an open gap is my Side Door Entry strategy.

It revolves around a strong open which sees a quick pullback an open gap or Bleedback into the prior day’s range.

In my experience, an Opening Range Breakout after a quick shake out does a good job of telegraphing a Trend Day.

The initial shake out pulls back the rubber band and stopped-out, sold-out bulls have to scramble to get back in and often are only convinced late in the day underpinning a move into the bell.

Putting the pieces together shows that, importantly, OTRK’s ORB on Tuesday triggered a mini Rule of 4 Breakout on the 10 min chart.

The takeaway is that if you got shaken out, the Rule of 4 in tandem with an Opening Range Breakout was a re-trigger warranting reloading.

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