As traders, we’re always on the lookout for high-probability setups that offer low risk and substantial reward potential. One such setup is the range break, which occurs when a stock breaks out of a tight consolidation pattern. This article will explore how Trade Ideas’ NR7 (Narrow Range 7) alerts can help you identify and capitalize on these lucrative opportunities.

The Power of Range Breaks:

Range breaks are a classic trading setup that can lead to explosive moves in a stock’s price. Buyers and sellers are in equilibrium when a stock enters a tight consolidation pattern. However, once the stock breaks out of this range, it suggests that one side (usually the buyers) has gained control, often leading to a significant price surge.

Finding Range Breaks with Trade Ideas:

While there are numerous ways to identify range breaks, such as preconfigured opening range breakout alerts or new high/new low alerts, Trade Ideas’ NR7 alerts provide a unique and practical approach. The NR7 alert identifies stocks experiencing the narrowest range of the last seven periods, indicating a tight consolidation pattern.

Case Study: MAXN

To illustrate the power of NR7 alerts, let’s take a look at the recent setup in MAXN. On the 5-minute chart, we can see that MAXN experienced a brief dip after the opening, followed by a strong rally and a tight consolidation pattern around the $33 level. It’s important to note that this wasn’t the first range break of the day, as there was an earlier one at a lower level. However, multiple range breaks can signify strength, indicating persistent buyer interest.

Using the 1-Minute NR7 Alert:

While the setup was visible on the 5-minute chart, the 1-minute NR7 alert provided an early heads-up that a potential breakout was imminent. By monitoring the 1-minute timeframe, traders can gain a slight edge in identifying these setups before they trigger on higher timeframe charts. The key is experimenting with different timeframes to find the one best suits your trading style.

Sizing Up the Trade:

When the NR7 alert was triggered on MAXN, the stock was trading at around $33. By applying a simple risk management rule of looking back 15 minutes for the lowest low, we can determine a tight stop loss level. In this case, the risk was a mere 5 cents, with the entry at $33.03 and the stop at $32.98. This shallow risk and the potential for a significant upside move create a highly favorable risk-reward ratio.

The Outcome:

After triggering the NR7 alert and breaking out of the consolidation pattern, MAXN surged higher, reaching a peak of $34.43. By risking just 5 cents, traders could capture a 40-cent move, representing an impressive 8R (risk-reward) trade.

Range breaks are a powerful trading setup that can yield substantial profits with minimal risk. By leveraging Trade Ideas’ NR7 alerts, traders can efficiently identify these high-probability opportunities across multiple timeframes. The key is to experiment with different settings, timeframes, and risk management techniques to find the approach that aligns with your trading style. As with any trading strategy, discipline, patience, and sound risk management are essential for long-term success. So, if you’re not already using NR7 alerts in your trading arsenal, it’s time to try them and unlock the potential of range break trades.