Setups › Momentum breakout

Momentum breakout

From Qullamaggie. In one line: one of the top 2% movers, broke out of a tight 10-day range.

About the names. The famous names are credit for publicly described ideas. Every test here uses our own simplified, fully coded version of the idea, so the numbers show how our code behaved on past prices, not how the named person trades or traded. No affiliation with, or endorsement by, any named person.

748

trades tested

41%

win rate

-0.11R

average result

-0.47%

vs Nifty per trade

What it looks like

A stock that is already one of the strongest movers in the whole market, up sharply over one, three or six months, pauses for a couple of weeks in a tight range while its short averages keep rising, then breaks out of that range. This is the momentum breakout that Qullamaggie describes as his bread-and-butter setup.

Why traders use it

Stocks that move the most tend to keep moving for a while (momentum). The tight pause lets the stock "digest" the first move without giving back much, and a breakout from it is a low-risk point to join the next leg: the stop sits just under the pause.

The exact rule we tested

The stock is in the top 2% of all NSE stocks by return over 1, 3 or 6 months.
Price above the 10-day average, the 10-day above the 20-day, and both averages rising over the last week.
Average daily range of at least 3% (it must actually move).
The previous 10 days stayed inside a range under 15% of the price.
Today's close is above the high of those 10 days.

Mistakes to avoid

Buying a loose, wide pause. The tighter the pause, the closer and safer the stop.
Late entries. A stock already 5% or more above the breakout point has a worse risk-to-reward.
Large size in a weak market. Momentum stocks fall hardest when the whole market turns.

How we tested it

Every day from 05 Nov 2024 to 05 Nov 2026, every main-board NSE stock (price ≥ ₹50, turnover ≥ ₹5 crore a day) that showed this setup was bought the next day above its last high, with a stop 1.5 ATR below and a target 2.5 ATR above, and sold after 10 trading days if neither was hit; 0.1% costs per trade. Traders usually hold this setup 3-5 days.

The maths behind the result

Average winner +1.15R, average loser −0.97R, win rate 40%. Expectancy = 40% × 1.15 − 60% × 0.97 = -0.11R per trade. To break even with this payoff you need to win at least 46% of trades. How expectancy works.

A historical simulation, not live trading and not a recommendation.