After studying the stock market for many years, I identified 14 unique behavior patterns in the stock markets. Although the proprietary behavior patterns are similar to traditional engineering diagram patterns, they are not the same. Once the patterns have been identified and observed, they provide clues as to market direction.
The 14 behavior patterns are shown repeatedly on a graph and are much easier to identify (and name) than traditional patterns. One of these patterns is the most powerful pattern in the world and can be a great money maker. If you only traded this one pattern of behavior, you could make a decent profit. However, the key is correct identification.
The name of this pattern is “Steamroller”. More precisely, it is the Bullish Steamroller (another behavior pattern is the Bearish Steamroller, but it is saved for another day).
If you look at the Bullish Steamroller on a graph (a one minute line graph is my preference as it is easy to visualize the behavior pattern) you will see a strong upward trend that starts slowly in the morning and gains strength as the day progresses.
The Steamroller pattern is shown on charts of both individual stocks and indices like the S&P 500
SPX, -0.91%,
and ETFs (Exchange Traded Funds) such as SPDR S & P 500 ETF Trust
SPY, -0.93%
and Invesco QQQ Trust
QQQ, -2.53%.
Not just any ordinary uptrend
Some technicians may say, “Oh, it’s just an upward trend,” but the Bullish Steamroller isn’t just any upward trend – it has unique features.
For example, although turbulence can occur along the way, the higher it moves the higher the Bullish Steamroller moves, especially after noon. To be a real Bullish Steamroller, it will be unstoppable until the end. That’s how you know it’s the real deal.
The Bullish Steamroller will also refuse any attempt by short sellers to stop or reverse its direction. If you are a short seller, it is wise not to tackle a steamroller pattern as it is easy to get mowed.
For example, on March 1, the futures market indicated a higher opening for US stocks. That was an indication that a bullish steamroller might develop later in the morning. As expected, the market zoomed out the starting gate. It was a perfect day to go long on certain stocks or call options. In fact, everyone who went for the Steamroller pattern within the first hour did very well, especially with Invesco QQQ Trust, SPDR S&P 500, Wayfair
W, -8.17%,
and Etsy
ETSY, -12.23%.
Each of them had a bullish steamroller behavior pattern that day.
How to ride the steamroller
A bullish steamroller usually pushes all leading stocks higher. The first clue a steamroller could develop is when the futures market indicates a strong opening (more than 1%). Chances are, but not guaranteed, that a Bullish Steamroller will show up on that day and sometimes during the first hour of trading.
The biggest risk in trading a Steamroller pattern is that it will cause an unexpected intraday reversal. Although the Bullish Steamroller rarely reverses, it can happen when there is negative breaking news. The chances of a reversal are slim, however, as most market participants, including institutes, day traders, investors, hedge funds and algae, have subscribed to the strong uptrend.
Don’t make the common mistake of climbing onto a Bullish Steamroller too early as the market often starts off strong but loses steam within the first hour. To be a true Bullish Steamroller, the indices (or individual stocks) need to keep rising with only temporary withdrawals.
Often times, the Bullish Steamroller develops later in the day. For example, the market could meander for the first hour and turn into a strong bullish steamroller in the morning and then mow everything on its way.
Also, don’t confuse the Bullish Steamroller with an inventory that has a gap when opened. Stocks or indices that create a gap are not bullish steamrollers. In fact, stocks and indices that create a gap at the opening bell sometimes reverse direction within minutes – what I call a “one-minute miracle”.
After all, a steamroller doesn’t appear every day. Patient traders wait for bullish market conditions before trading the Bullish Steamroller pattern. It is not designed to be traded every day, but only on days when everything (technical analysis and the entire market environment) is correctly aligned and all systems seem to be “go”.
The good news for investors and traders is that in the right market setting (usually during a bull market), the Bullish Steamroller can last for not just a day, but a week or more. If you are an investor or long term trader, you can make great profits just by waiting for a Steamroller day and then buying.
Michael Sincere (michaelsincere.com) is the author of Understanding Options, Understanding Stocks and his latest Make Money Trading Options, in which he introduces all 14 behavioral patterns and the Test Trading Strategy.
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