Hey traders,
Sometimes we make this game too complicated.
Charts, indicators, fancy math… all that has its place. But one of my favorite setups is dead simple.
It’s this:
When a quality stock breaks out to new 52-week highs, wait for the first pullback… then buy it.
That’s it.
Why? Because momentum is real.
When a stock pushes into fresh highs, it’s telling you something about demand. Big money doesn’t usually chase a new high only to give up the next day.
That said, hardly anything blasts through a 52 week high and keeps going straight up.
See, big money tends to wait and add more to their position on the first dip.
So the setup I like? First, watch for a stock hitting new 52 week highs. But remember, as I always tell you — new highs are meaningless without a trend behind them.
So make sure there’s a strong trend behind it and it’s not just spiking up on news or some other market condition.
Then, that first pullback is where you can step in — with a tighter stop and a better entry than traders chasing a breakout blindly.
I’ve used this approach for years. Just recently, I was looking at Broadcom (AVGO). It hit fresh highs, then pulled back, and I stepped in.
Nothing exotic. No complicated options strategy. Just a strong stock, showing strength, giving me a cleaner price to get involved.
Why This Works
- Momentum attracts more momentum. A stock at 52-week highs is in the spotlight, and buyers pile on.
- The first dip shakes out weak hands. That’s when the conviction buyers step in.
- Defined risk. You know where you’re wrong — if the pullback breaks down further, you’re out quick.
The Big Picture
The market is full of noise. Every day, a new headline tries to knock you off your plan. But when you’ve got a simple setup that works, you don’t need to overthink it.
For me, this “new high, first pullback” trade is one of those bread-and-butter plays.
It’s not flashy. It won’t hit every time. But when it does, it can give you a beautiful ride with the wind at your back.
I talked all about it on the latest episode of Market Masters. If you’re not joining us every Wednesday and Friday at 11:30am Eastern, you’re missing out. Check out our on-demand Market Masters replays here.
Trade well,
Jack Carter
P.S. My latest scan has turned up one stock that could be set to pop this week. Check it out here.
