IBD 100 Stocks - Breakaway Gaps to New Highs on Big Volume

Click on the link below to view the seven IBD 100 (Investor Business Daily) stocks that gapped up to new highs on above average volume last week...

  CandleGlance (DGIT,MELI,BGFV,IAG,SLH,CTSH,MSTR) - StockCharts.com

Charts courtesy of StockCharts.com

Of the seven, the IBD 100 stocks with most promise are MELI, DGIT, MSTI, and, to a lesser extent, SLH because of the enormous volume and  magnitude of the breakaway gaps.

Typically IBD 100 stocks that exhibit this degree of momentum and volume outperforming the broad market going forward.

However, risk management is vital when buying IBD 100 stocks that meet the Breakaway- Gap-to-New-Highs-on-Big-Volume criteria.

Caveats:

Don't invest in this method unless you are willing to set your stop loss at any close below the stock's 20-day moving average (the blue moving average line on the charts). You must risk no more than 2% of your account size on any single trade, so size your position accordingly.

My experience in back-testing and real world trading of IBD 100 stocks that meet this criteria is that roughly 3 out 4 trades are profitable, with winners outpacing losers by an enormous margin.

As a safety-first filter, however, don't buy any stocks (whatsoever, for any reason!) when the S&P 500 is below its 200-day moving average.