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Introduction: Harnessing the Power of Breakout Trading
In the dynamic world of swing trading, it’s the bold who consistently capture the most profits. And in this arena, breakout trading has proven time and time again to be one of the boldest and most profitable trading strategies.
In this powerful, educational post, we walk you through how our proven swing trading strategy identified the ideal buy entry point in Floor & Decor ($FND), which exploded +20% higher over the following weeks.
This recent win, originally discussed in our flagship swing trading service, is a prime example of the power of breakout trading with Morpheus Trading Group. If you’re on the lookout for high-performing, actionable trading insights, you can’t afford to miss the powerful, educational $FND breakout trade review below.
Spotting the Breakout Trade Setup: The Power of the 50-day MA
A critical tool in our swing trading arsenal is the 50-day moving average—a simple, yet highly reliable indicator of intermediate-term price momentum.
In a steadily uptrending stock, the first pullback to the 50-day moving average (50-day MA) frequently triggers institutional buying activity. Likewise, if a leading stock breaks down below its 50-day MA, traders and investors often buy when the price moves back above the 50-day MA.
The 200-day moving average is also an extremely powerful moving average for trend analysis. Learn more about the 200-day moving average indicator here.
In the June 23 issue of The Wagner Daily, we said that Floor & Decor ($FND) could be in play as a breakout trade after reclaiming its 50-day MA, then forming a tight consolidation above this crucial indicator.
We also posted this annotated chart of the $FND buy setup in that day’s report:
Notice how $FND reclaimed its 50-day MA on strong volume in early June, then consolidated above it. This price action signaled strong, increasing bullish momentum, and set the stage for a potential breakout trade entry.
Our analysis at this stage was clear, and we told members, “$FND continues to defend the 50-day MA and could be in play on a downtrend line break.” Buying a breakout above this downtrend line potentially provided us with an ideal, lower-risk entry point—an essential element of the MTG swing trading system.
The Larger Canvas: Analyzing the Weekly Chart
Perspective is everything in chart analysis. As such, it’s crucial to always look at the patterns on multiple time frames.
After zooming out to the longer-term weekly chart of $FND, we noticed the price was currently in a bullish, 4-month consolidation base that developed after a recent downtrend line break.
This “big picture” perspective bolstered our confidence in $FND as a potential breakout swing trade setup:
The Result: Reaping the Rewards of Breakout Swing Trading
$FND quickly validated our analysis, as the price broke out above the bullish base of consolidation to a new swing high just 2 days after our original member alert. We also mentioned $FND in the Morpheus Swing Trader Chatroom when it broke out around the $100 area.
Although the breakout volume was slightly less than average, the price firmly held the critical $100 support level on a pullback, leading to a bullish rip higher on strong volume.
Below, notice the explosive rally that promptly followed our June 23 breakout entry trigger:
As shown above, $FND stock rallied to a +20% gain less than 4 weeks after our buy trigger point, then began consolidating again.
$FND gapped down on August 5 from a negative reaction to its quarterly earnings report. However, as is customary with our strategy, we typically suggest members sell (at least partial position size) to lock in profits on winning swing trades ahead of earnings.
In this case, before a moderate earnings gap down, this strategy would have locked in a gain of +15-20% ahead of the earnings release. Learn more about our powerful earnings gap trading strategy here.
Seize the Day: Don’t Miss Out on the Next Big Breakout Trade
The story of Floor & Decor ($FND) is a testament to the potential of breakout swing trading with the MTG tribe. The market is brimming with hot trading opportunities, and we’re here to help you seize them now.
Ready to elevate your trading game? Become a member of our exclusive Wagner Daily PRO service and join more than 70,000 traders who have learned to trade with confidence with MTG—since 2002! Don’t miss out on your next big +20% breakout winner.
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