T3 Live

VXRT & the Rule of 4 Breakout Setup


Earlier this week VXRT was flagged on the Hit & Run private Twitter feed anticipating a Rule of 4 Breakout.

This is a breakout over triple tops.

You seldom see triple tops or bottoms in the market. The 4th time through usually seals the deal for follow through, which oftentimes is explosive.

The daily VXRT below is for 2012 through Monday showing the flat-line Rule of 4 on the table.

What is intriguing is that follow through ties to an Angular Rule of 4 Breakout (what is not shown is the $17 high from the summer of 2000 for a declining 3 point trendline on the weeklies at 11).

Notice that the rocket in April was triggered by an Angular Rule of 4 Breakout.

On Wednesday, VXRT saw breakage above 7.90, triggering a 4 month Rule of 4 Breakout.

Follow through projects to 11.

Another example of the Rule of 4 is CLNE on Wednesday.

CLNE exploded on a gap yesterday through a declining 3 point trendline connecting the February, March and April highs.

Notice the contraction in range which preceded the expansion in range, aided and abetted by the move over triple tops.

The expansion in volume in both VXRT and CLNE backstop the idea of extensions higher.

In sum, markets play out in threes… Head & Shoulders, Cup & Handles, 3 drives to highs and lows and when the 3 point in a pattern is cleared, such as the Rule of 4, explosive moves often follow.

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