One of our favorite setups occurs when a stock breaks a key level, fails to follow through, and then reverses sharply in the opposite direction.
These patterns are known as “shakeouts”, and the best ones set the stage for powerful breakouts.
It is no surprise these shake n’ go setups have earned us the quickest doubles. They’ve also delivered some of our best trades in 2024.
When we notice something working, we keep doing it.
This week, we saw a lot of breakdowns failing, and shaking traders out before ripping higher. We jumped on the opportunity and put a new trade on the Regional Banks ETF $KRE.
After hitting fresh two-month lows Friday, it’s reversed higher and trapped the bears this week.
The bounce is resulting in a textbook “scoop n’ score” setup—just as momentum is shifting in our favor. The best trades start working right away like this.
Think of the shakeout or the scoop as a failed move. The score or the subsequent rally is the fast move that follows.
You don’t always get the fast move in the opposite direction. But when you do, these trades work right away and can turn into huge winners. It’s already happening with our KRE trade.
This isn’t new to us.
Look back at $PLTR in early August. It faked a breakdown, only to squeeze the shorts and launch higher.
This was such a nasty shakeout. PLTR fell more than 10% intraday on August 5th which was not just an epic volatility event, but also marked a short-term bottom for the market. We got in the very next day. The stock has been on a tear ever since.
And we can’t forget our $SQ trade from November—a flag pattern appeared to fail but quickly turned into a textbook shake n’ go.
SQ went on to break out of a massive base. This was the move that sparked it.
Both of these trades became multi baggers. But before their big moves, they looked similar to how KRE does right now.
We only put the trade on a day ago, but the calls are moving in our favor with bank earnings season just getting underway.
It looks like the rally in interest rates may finally be cooling here too, tempered by today’s inflation numbers.
Both of these are potential catalysts that could fuel a big reaction rally from the banks in the coming days and weeks.
