The 15 Min Bullish Consolidation Breakout Trading Strategy

The 15 Min Bullish Consolidation Breakout Trading Strategy aims to capture a breakout in the 15 min time frame. Yes, a breakout can happen even in a 15 min time frame. Usually we hear about breakouts in the daily time frame. Did you know that breakouts can also happen in smaller time frames such as the 15 min?

If a breakout in the daily time frame can result in a stock going higher for 2 - 3 months, a breakout in the 15 min charts can result in the stock moving higher in 2-3 days. Therefore, this is a great trading strategy to capture multi day moves. You can close out the position intraday if you are satisfied with the gains but you can also hold on to the stock for a few days for bigger gains.

The 15 Min Bullish Breakout Of Consolidation

15 min charts can often be quite volatile. Sometimes they do not make sense for most traders. But once in a while you will be able to spot a period of calmness in the stock. The stock mysteriously is able to form a nice 15 min consolidation. This 15 min consolidation will last almost the whole trading day.

When the stock breaks above the consolidation the next trading day, it can often send the stock higher by a few days.

The 15 Min Bullish Breakout Of Consolidation

This is what a 15 min bullish consolidation breakout setup looks like. Notice how on the 21st of November the stock had a tight consolidation? I have drawn a nice box over the consolidation area. The next day, AMZN broke out above the consolidation and slowly drifted higher. AMZN continued to go up for the next 2 days.

Traders can buy the breakout above the consolidation and hold it for 2-3 days. From my experience, I notice that this trading strategy lasts for 2-5 days. You can put a stop below the consolidation. Since the stock runs up quite a lot in a few days, we can often get a very nice risk reward with this trading strategy.

The Risk Reward Ratio In Trading

Criteria For The Consolidation Breakout Trading Strategy

It is not as easy as looking for a consolidation in the 15 min chart. In order for us to be able to find the cleanest and best trading setups, we need to have some criteria that the candidate needs to pass. This will act as a filter for us to weed out the bad candidates from a winning candidate.

Please realize that not every trade is going to be a winner. Which is why you have a stop loss. The criteria just acts as a filter to increase our odds of success.

Here are the criteria:

  1. The stock must have a tight 15 min consolidation
  2. The consolidation should last at least 2/3 of the day and stay flat till the end of the trading day
  3. The stock should be above its 15 min 20 MA and 50 MA
  4. It will be best if the stock is above its 15 min 200 MA
  5. The stock should break above the consolidation
criteria for the bullish consolidation 15 min breakout

The chart above is the same chart of AMZN but I have put in the 20 MA, 50 MA and 200 MA inside. AMZN satisfied all the criteria and therefore it provided a nice setup.

First of all, the stock had a tight consolidation in the 15 min chart. You will see that the consolidation is relatively tight and not the wide and whippy type of movement. Secondly, the tight consolidation lasted at least 2/3 of the trading day. It ended the day still consolidating.

The consolidation is important because it is like a tight spring that once released will sling the stock upwards. Thirdly, the stock is above its rising 15 min 20 MA and 50 MA. This shows a picture of strength in the stock. Fourthly, the stock is above its 15 min 200 MA. This tells us that the stock is bullish in a longer term in the 15 min time frame.

Last but not least, the stock broke out of the tight consolidation the next day. This completed the setup and all that the trader needs to do is sit tight and let the trade work out.

How To Enter The Trading Strategy

Since this is a breakout trading strategy, the entry is pretty straightforward. All you need to do is to buy the breakout.

how to trade the 15 min bullish consolidation breakout

The trader can buy the stock when it breaks above the highs of the consolidation. In the chart above, the trader can buy TRV the moment price breaks above the highs of the consolidation. Since the first 5 minutes of the trading day can be quite volatile, the trader may want to wait and do nothing for the first 5 minutes.

This is so that the trader allows the stock to swing wildly for the first 5 minutes. We want to avoid the wild first 5 minute swing. We can also avoid the bigger bid ask spread that often happens in the first 5 minutes of the trading day. Sometimes, it might be wise to wait for the end of the first 10 - 15 minutes of the trading day to finish.

Where To Put A Stop Loss

The place to put a stop loss is also quite straightforward. We just need to put the stop loss below the lows of the consolidation. The breakout will either work very well or it will fail. If it goes below the consolidation, then we know we are wrong and there is no reason to hold on to the stock anymore.

how to put a stop loss in the 15 min bullish consolidation breakout trading strategy

You can see how we can put a stop loss in the example above. The moment we enter the stock, we should put a protective stop loss below the lows of the consolidation.

If you draw a box over the entire consolidation, you can easily see where you should buy the breakout and where you should put the stop loss. It could not get easier than that.

How To Take Profits Off The Table

I am not only giving you a setup to trade stocks. In fact, I'm giving you a complete system. From how to buy, to where to put a stop loss and now, how and where to take profits off the table.

Where and how to take profits off the table is not an easy question to answer. For that you will need quite a lot of technical skills. Which is why I recommend that you take the FREE Stock Market Course that I have written so that you can learn all the technical analysis skills that you need.

Anyway, here are some thoughts on how to take profits:

  • Take some profits off the table when the stock drops below the 15 min 20 MA (usually after a nice run up)
  • Take some profits off the table when the stock drops below the 15 min 50 MA
  • Take profits off the table when the stock meets a resistance area in the daily charts
  • Take 1/2 of your positions off the table when you have a 1:2 Risk Reward Ratio
  • If you have taken off 1/2 or 1/3 of your positions off the table, raise your stop loss to breakeven (your purchase price)
  • If the stock has run up a lot and you are now making quite a lot of money, you should also raise your stop loss to breakeven

The above is some proper ways to take profits and I have also included some trade management techniques into it. For example, you should put your stop loss at breakeven after the stock rises a lot. This provides a protection in the event the stock suddenly crashes. It is already bad to lose your profits. Make sure you do not go into the red as well.

how to take profits in the 15 min consolidation breakout

In the chart above, you can see how you can take 1/2 of the profits off the table when the stock dropped below the 15 min 20 MA. You can ride the other 1/2 higher and hope it gives you more profit. To do that, you can continue to keep the stock as long as it stays above the 15 min 50 MA. If it drops below the rising 15 min 50 MA, you can consider selling the other half. 

There is no way to know how high a stock can go. The stock may go up and up especially if there is no resistance overhead or if it is making a new high. The moving averages are great trend following tools to help you know when and where to take profits. They might not be perfect but at least they offer you a system to know what to do.

Day Trade Or Swing Trade

Is this trading strategy a day trade or a swing trade?

Well, I would say you can treat is as a day trade and you can treat it as a swing trade. It all depends on whether you are comfortable with having overnight risks. If you do not like to hold stocks overnight, then sell the stock if it has given you a nice profit.

If you choose to keep the stock for a few days, you might have overnight risks such as a gap down. But you will also tend to achieve a higher risk reward ratio. Sometimes you can risk $1 to make $5. There is no one size fits all answer. You need to weigh the risk and the reward and make a balanced decision.

should you hold a stock overnight

In the example above, you can either take profits off the table and have a positive day. Or you could have continued to hold on to the stock and hope that it rises for a few more days. Whether you decide to take your profits and close for the day or hold on will depend on many variables.

If you find it hard to decide, you could sell 1/2 today and hold on to the other half. That is the beauty of trading. You do not need to make an all or none decision.

should you take a day trade and turn it into a swing trade?

The charts above is the daily chart of UTX (on the left) and the same 15 min chart (right) of UTX but fast forward a day. If you had taken this trade, you might have noticed that the daily chart is hinting of a resistance area. The stock rose up to the resistance area and this may make some traders a bit worried.

Well, you could have sold 1/2 of the position to ease your worries. If you decide to hold the stock overnight, you will realize that it dropped below the 20 MA and 50 MA in the 15 min charts. This gave us a hint that the stock may not be performing that well because of the resistance.

If you have sold 1/2 yesterday, you would have booked some profits. And when the stock dropped below the 15 min 50 MA, you could have sell the other 1/2 and close out all the positions in the stock at a good profit.

Conclusion

Stock breakouts happen in many different time frames. The 15 Min Bullish Consolidation Breakout is another trading strategy that aims to capture breakout bullish runs in stocks. You can either treat it as a day trade or extend it to be a 2-5 day swing trade. It all depends on the stock chart and the market environment. As you practice this trading strategy, you will be more and more experienced and will gain the necessarily knowledge to navigate this trading strategy well.

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