Model 7 — Big-Move Breakouts

🎯 What This Model Finds

Model 7 targets explosive breakout moves—stocks breaking above 20-day highs with institutional-quality volume confirmation. Scans the entire US market (~9,600 stocks) for maximum opportunity capture. The strategy combines:

• Big-Move Breakout Algorithm: 20-day high breakouts, RVOL ≥1.5x, tight base, not extended
• Momentum Scoring: Relative strength, tight consolidations, leaders near highs
• Comprehensive Coverage: Full market scan captures breakouts across all caps (large, mid, small, micro)

Philosophy: Catch the start of explosive 5-20 day runs. Backtest shows 30-35% win rate with average +15-25% on winners = profitable with proper risk management (2-3:1 R:R).

✅ Entry Criteria

Score Threshold:

• Weekly: Score ≥ 70 → Watchlist (top 25 stocks)
• Daily: Score ≥ 85 + EOD quality checks → Buy recommendations
• Confirm: Price ≥ trigger AND (live price ≥ entry OR RVOL ≥ 1.5x) → Confirmed buys (3-5 final)

📋 3-Stage Workflow

🚀 Entry Rules

• Timing: Enter between 9:50-10:15 AM ET (avoid opening volatility)
• Trigger check: Price must be ≥ 20-day high (breakout still valid)
• Volume check: RVOL ≥ 1.5x OR price showing strength (relaxed OR logic)
• Entry price: Use current ask price when confirmed (don't chase)

Skip If:

• Price falls back below 20-day high trigger (failed breakout)
• RVOL < 1.0x AND price weak (no follow-through)
• Spread > 1% (poor liquidity)
• Earnings within 2 trading days
• Gap up > 8% at open (too extended, wait for pullback)

🎯 Exit Strategy

Initial Stop & Target:

• Stop: 7% below entry OR recent 10-day swing low (whichever is tighter, max 15% away)
• Target: 3R (3× risk) or +20%, whichever comes first
• Why 20-day breakouts? Backtests show these deliver 15-25% in 5-20 days when they work

Profit Protection:

• At +1R: Move stop to breakeven (lock in risk-free)
• At +2R: Take 25-50% off + trail remaining with 10-day SMA
• Strong momentum: If hitting +2R in < 5 days, hold full position and trail tight

Time-Stop:

• Day 20: Exit any remaining position at close
• Rationale: Most big moves complete in 5-15 days. After Day 20, momentum usually fades.
• Exception: If still showing volume (RVOL > 1.5x) and price > 10 SMA, can extend to Day 30

🛡️ Risk Management

• Position size: 1% account risk per trade (size = 1% account / distance to stop)
• Max positions: 5 open breakouts at once (they cluster in timing)
• Account risk cap: Total risk ≤ $6,000 (6% of account)
• Liquidity rule: Entry ≤ 5% of 30-day ADV (don't be the breakout volume)
• No earnings: Strict ±7 day block around earnings (breakouts get crushed on misses)
• Cut losers fast: If breaks below trigger within 2 days, exit immediately (failed breakout)

⭐ What Makes a Good Setup

🧠 Breakout Psychology & Win Rate

Why only 30-35% win rate?

• Most breakouts fail (60-70% pull back within 3 days) — this is normal!
• But the 30% that work deliver +15-25% in 5-20 days = +2-3R per winner
• Math: 30% WR × +2.5R avg winner = +0.75R expectancy (profitable over 50+ trades)

How to improve your edge:

• Only trade ⭐ dual signals: Win rate jumps to 40-45% (both algorithms agree)
• Wait for RVOL ≥ 2.0x: High-volume breakouts have 50%+ win rate
• Enter only if score ≥ 90: Top 20% of setups win 45% of the time
• Cut losers at Day 3: If not up +5% by Day 3, often fails. Consider exiting early.

📊 Expected Performance

All Breakouts (Score ≥ 70):

Dual Signals Only (⭐ Score ≥ 90):

Backtest: 12 months on 6 curated pools. Key learning: Dual signals + high volume (RVOL ≥ 2x) = 50%+ win rate. Be selective!

💡 Tips & Tricks

• Prioritize dual signals first: ⭐ = 40-45% win rate vs. 30% for single-algo picks
• Volume is king: RVOL ≥ 2.0x breakouts work 50%+ of the time, < 1.5x fails 75%+
• Day 3 rule: If not up +5% by Day 3, consider cutting it (most winners show profit fast)
• Trail aggressively after +2R: Once risk-free, let winners run to 20-day time-stop
• Check sector rotation: Breakouts work best when the sector is hot (compare to sector ETF)
• Failed breakout = skip: If a stock failed a breakout < 10 days ago, skip the next signal (setup burned)
• Gap up > 8%? Wait: Let it pull back to prior high, then enter on retest (better R:R)