Systems, Setups & Process of Swing Trading from @stockbee

Recently, I’ve been working on improving my trading setups, rituals, and practices. I’ve been reading and following @stockbee's blog and watching his YouTube videos to gain insights and setups from him.

Blog link: https://stockbee.blogspot.com/

YouTube channel: https://www.youtube.com/@Stockbeevideos

This post is about what I’ve learned from him and what I’ll be doing for my trading routine. I’ve also highlighted the books, traders, and strategies I plan to learn and practice over the next 1-2 years.

These notes are drawn from stockbee(Pradeep Bonde) blogs and videos. I encourage you to explore his resources directly for a deeper understanding. What I’m sharing here are my personal insights and perspective from learning through other traders

PS. I will provide all the scanner code in python and R in next upcoming newsletter, please stay tuned.

Here is the code screenshot from my trading insight & quant platform “Bison” which I’m building to streamline my trading strategies and processes.

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To Master & Learn From:

1. Learn how to master momentum burst and episodic pivots from @stockbee - Pradeep Bonde

2. Kristjan Qullamaggie -> Flag Patterns + EP + ADR

3. William O'Neil -> CANSLIM + Chart Pattern

4. Mark Minervini -> Finish Books and get the setups + Process

5.Igor Tulchinsky -> Finding Alphas #WorldQuant

6. Jessie Livermore

7. Peter Lynch -> Fundamentals + Investing

8. Market Microstructure

9. Market Wizards -> Re Read and get setups

10. Nicholas Darvas

11. Volume Based Trading -> Anna Coulling

12. Super performance stocks -> Richard S Love

13. The Hedge Fund Edge -> Mark Boucher

14. Dan Zanger -> Momentum Masters

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Systems

1. Episodic Pivot

2. Momentum Burst

3. Anticipation Breakouts

4. ADR + Zanger Volume Ratio + Bull Flags / Flags

5. CANSLIM + Chart Patterns

6. Building Alphas

7. More Reliable Systems ++

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Setups

1. 4%

2. $ Breakout

3. LTB - Low Threshold Breakout

4. Ants - Anticipation

5. Ants +++ : Anticipation Plus Plus Plus

6. Reversal

7. TI30

8. TI65

9. Momentum Scans

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Step by step, from 0 to 1,  

Follow the path, and you'll have won.  

Detailed steps lead the way,  

To success, come what may.

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Processes

Process 1 : Momentum Burst

Scans

1. Bullish 8% plus or 5 dollar plus in 5 days

2. 1. 4%

3. $ Breakout

Ritual to check

1. Breakout Day Close: Stock should close near or at its high on the breakout day.

2. Consolidation Period: Stock should consolidate for 3 to 20 days prior to the range expansion day, with a narrow range or negative bar immediately before the breakout.

3. Linear and Orderly Move: The stock's prior price action should be linear and orderly, avoiding excessive volatility.

4. Volume on Breakout Day: Breakout day volume must be higher than the previous day.

5. Price Pattern: Stock should not have been up for three consecutive days prior to the breakout.

6. Low-Priced Stocks: Stocks priced below $5 tend to make explosive moves, with potential gains of 40% in 3 to 5 days.

7. Consolidation/ Pullback: A narrow range, sideways consolidation, or a shallow and orderly pullback is ideal before the breakout.

8. Previous Move: The previous leg of the uptrend should be linear, without major breakdowns (preferably no 4%+ breakdowns).

9. First to Third Setup: The breakout should ideally be the first, second, or third setup since the start of the move, indicating a young trend.

10. Young Trend: Preferably, focus on young trends defined by the number of days the stock has been rallying in the overall move.

11. Pullback Preference: The first and second pullbacks or consolidations in a rally are more reliable.

12. Extended Rallies: Extended rallies are prone to corrections or breakout failures.

13. Orderly Consolidation: Corrections or consolidations should be orderly, with volume during this period preferably being consistent and stable.

14. Price and Volume Surge: The scan should detect a surge in both price and volume, with today's volume being higher than yesterday's.

Entry

• Enter on first day

Exit

• Exit within 3 to 5 days

• If loss > 8%

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Process 2 : Episodic Pivot

EP

1. Understand and define what an EP is technically.

2. Create a scan that finds this EP.

3. Create a combo list with Stocks+ADRs, put in your personal liquidity criteria, min. price criteria and your EP condition.

4. In settings for the EP condition set „within last x bars“.

My definition of an EP setup is something that has a game-changing catalyst and that is neglected.

Episodic Pivot Catalysts

 So here is a list of catalyst which most often lead to profitable trades on EP.

- Earnings acceleration

- Sales Acceleration

- New Contracts or new orders

- New Product Launch or news

- Sector Runaway move

- Biotech/drug approvals

- Biotech/drug tie ups with large companies

- Earnings guidance raised by company

- Inside buying>1 million

- IBD Rating/ IBD 100 Addition/IBD highlighting a stock

Scans

"Basically it comes down to finding stocks with greatest short term momentum that will turn in to long term momentum."

The Scans:

1. up or down 30% in a single day on at least 300000 shares traded or

2. up or down 20% in a single day on at least 1 million shares traded or

3. up or down 5$ in a single day on volume of at least one million shares and

4. still trading above $7 and

5. has options

6. has a long term catalyst like earnings or accounting fraud

Bullish:

( 100 * (C - C1) / C1) >= 20 AND V > 10000 AND C >= 5  

( 100 * (C - C1) / C1) >= 30 AND V > 3000 AND C >= 5  

(C - C1) >= 5 AND V > 10000 AND C >= 5  

( 100 * (C - C1) / C1) >= 10 AND V > 1000 AND C >= 5  

C > C1 AND V > 5 * AVGV50.1 AND V > 3000 AND C > 5  

These five seperate scans give the bulish pivot list

Bearish :

 ( 100 * (C - C1) / C1) <= ( - 20) AND V > 10000 AND C >= 5  

( 100 * (C - C1) / C1) <= ( - 30) AND V > 3000 AND C >= 5  

 (C - C1) <= ( - 5) AND V > 10000 AND C >= 5  

 ( 100 * (C - C1) / C1) <= ( - 10) AND V > 1000 AND C >= 5  

These give bearish pivot candidates.

EP Scan

(c/c1>1.04 or c/c1<0.96) and v>3k avg50.1 and c>=3 and v>=300000

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Process 3: Anticipation Breakouts

Anticipating a breakout gives you an early entry into a breakout.

Scans

DOUBLE TROUBLE 1% MOVER SCAN

• US common stocks or NSE All Stock

• c/minl252>=1.8 and minv3.1>=100000

• Price % change Today between 1 to -1%

TI65 1% MOVER SCAN

• US common stocks or NSE All Stock

• avgc7/avgc65>1.05 and minv3.1>100000

• Price % change Today between 1 to -1%

MDT Above 1.19

• US common stocks or NSE All Stock

• c/avgc126>1.19 and minv3.1>100000

• Price % change Today between 1 to -1%

After running these two scan merge them together as some stocks will be common. Then go through the list to find setups that are setting up for possible breakout.

Ritual

WHAT TO LOOK FOR IN GOOD ANTICIPATION SETUP

• Series of narrow range days in pullback/consolidation

• Orderly pullback with no 4% b/d during the pullback or consolidation

• Low volume pullback

• Low volatility during pullback

• Linear first leg if looking as continuation setup

• Stock should go up smoothly and not in volatile manner

• 3 to 10 days consolidation/pullback

• Not up 3 days in a row

Points to remember

1. Avoid Momentum Burst Stocks: Focus on stocks not currently undergoing a momentum burst. Stocks in extremely low momentum phases are ideal for anticipation.

2. Low Momentum Phase: Look for shallow pullbacks or consolidations within established momentum trends.

3. Low Volatility Candidates: Prioritize stocks with very low volatility over the past 5 to 10 days.

• Check for a series of narrow-range bars during this period.

• Bollinger band squeeze is a good indicator of low volatility and potential for a breakout.

4. Avoid Extended Stocks: Focus on stocks within their first or second setup in an established trend.Avoid extended trends as they have a higher likelihood of failure when anticipating a breakout.

Early Entry Strategy

5. Early Entry Advantages:

• Entering early can boost your trade profits.

• Early entry allows for a closer stop-loss, reducing risk.

• You can capitalize on even small moves, improving overall trade efficiency.

• Enter without waiting for the actual breakout to maximize potential gains.

Anticipation Requires Planning

6. Daily Process Flow: Anticipation setups require more pre-planning compared to traditional breakout buying.

• Develop a daily process to review potential setups after market close.

• Refine and follow a consistent process template to identify candidates.

Focus on Quality Over Quantity

7. Track 3 to 5 Quality Setups: Limit your list to 3 to 5 high-quality setups.

• Prioritize "A" grade pre-momentum burst setups.

• Narrow your list down for the next trading day to ensure focus on the best opportunities.

• Quality setups should always take precedence over quantity.

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How to improve procedural memory and daily practice

Daily Practice - This 15 minute exercise

1. Morning Review:

• Study stocks with 8%+ moves or $5+ moves in the last 5 days.

• Note patterns, setups, and volume changes.

2. Run Scans:

• Use bullish and bearish scans to identify potential trades.

• Analyze the results and write down observations.

3. Capture Insights:

• Document setups, capture images, and make notes on potential trades.

• Focus on momentum bursts and range expansions.

4. Continuous Learning:

• Reflect on past trades and refine your strategy.

• Engage with the trading community for shared insights.

Important Points:

• A 8% plus or 5 dollar plus move in a short 5 day time period is a explosive move and it is the kind of move everyday we are trying to exploit. Thousands of moves like this if traded with proper risk control and tight stops can make our year.

• There are many traders who are obsessed by the index moves and you will see everyday they spend considerable time analyzing them using chart patterns or pivots or support and resistance.

• But as a swing trader my primary focus is on finding individual stocks with explosive short term moves. Index is just a backdrop. Properly selected individual stocks help you beat the index many fold. The indexes have been up 5 to 6% at best this year, but we are already up several multiples of that with minuscule risk using such explosive moves. With a max draw down of just 1.33%, extremely conservative .25% risk per trade  and using absolutely zero leverage these kinds of explosive moves have made me 4 to 5 times index gains in first 6 month.

Study these 8% moves closely to see how the move happens. What was the setup before the start of the move

• What was the 5 day action before start of this move

• Was the stock up or down before start of the move

• Was it near 52 week high or low

• What kind of Trend Intensity it had

• What triggered the move

• What kind of breakout

• How much was it up on first day of breakout

• What kind of volume on breakout and pre breakout and post breakout

• How did the move progress

• What was the magnitude of move in first 3 day

There are many variations of the 3 to 5 day momentum bursts you will find if you do this for months.

Some are high tight flags, some are double bottoms near top of the range, some are bottoming setups from 52 week low, some are part of range bound action. But most share some common characters.

• Moves of 8 to 20% start from some kind of pullback or sideways moves.

• They most often start with narrow range days.

• They are not up 3 days in a row before start of the move.

• Most have low volatility phase prior to breakout.

• On the first day of start of their 8% plus move they have significant range expansion.

• Most moves only last 3 to 5 days before having pullback.

If you know this you can anticipate some moves. You can figure out where to enter, where to exit, where to put initial stop, where to move stops and so on.

From the deep dive, What are your actionable learnings that can be used next week?

How can you do this

Run simple scans:

• Study Bullish 20% 

c/c5>=1.2 and minv3.1>100000 and c>=5

• Study Bearish 20% 

c/c5<.8 and minv3.1>100000 and c>=5

• Study 20 Dollar plus Bullish 

c-c5>=20 and minv3.1>=100000

• Study 20 Dollars plus bearish 

c5-c>=20 and minv3.1>=100000

• Study Bullish 50% 

  c/c40>=1.5 and c>=5 and minv3.1>=100000

• Study Bearish 50% 

c/c40<=.5 and c>=5 and minv3.1>=100000

What should you study for short term swing trading

• Study stocks up 8% plus in last 5 days

  c/c5>=1.08 and c>=3 and minv3.1>=100000

• Study stocks down 8% plus in last 5 days

  c/c5<=.92 and c>=3 and minv3.1>=100000

• Study stocks up 5 dollar plus in last five days

  c-c5>=5 and c>=3 and minv3.1>=100000

• Study stocks down 5 dollar plus in last five days

  c5-c>=5 and c>=3 and minv3.1>=100000

Those are the kind of stock moves that swing traders are interested in. By studying them daily you will understand what works and what to look for in momentum burst swing moves. Where to put stop. Where to exit. What to look for on day one of move.

If you do this for weeks and months or years you will be expert in 8% plus moves. When you study these moves over and over again you start finding small nuances to look for in successful breakouts.

A study like this will make you question some of your own guidelines for selecting trades or will make you question commonly touted market rules based on your own study.

One of the best reason for doing this is it is based on actual past winners in immediate time frame. It gives you lot of information on what is working currently.

Most days it takes only 10 to 15 minutes to do this. Some days while going through them you find something and then it can trigger a deeper study.

What should you study for longer term swing trading

• Study stocks up 100% plus in last 1 year

c/c252>=2 and c>=3 and minv3.1>=100000

• Study stocks down 50% plus in last 1 year

c/c252<=.5 and c>=3 and minv3.1>=100000

• Study stocks ranked in top 25 by MDT ranking c/avgc126 rank by it and study top 25 or 100

• Study stocks ranked in bottom 25 by MDT ranking c/avgc126 rank and study bottom 25

• Study stocks ranked in top and bottom 25 by YTD moves

Longer term moves have different characteristics and studying them will help you find buy points as the move progresses.

A study like this will also help you debunk lot of myths like should you only buy stocks near 52 week low or high, with only low floats, or only with IBD EPS ratings above 85 , or with growth or value characteristics, or IPO in last 2 or 3 years only and so on and on.

Get in to habit of building your own market and setup. No one else can do these exercises for you.

As everyone knows if you want gains of an exercise you need to do it yourself and not outsource it to others

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Thank you readers and subscribers, now let’s lock in full focus ane escape the matrix.
PS. I will provide all the scanner code in python and R in next upcoming newsletter, please stay tuned.