the  1-2-3-4  strategy  and  the  5-Day  Momentum
Method. The main difference is that the V-Thrust strategy is mostly a
day-trading  strategy.
Let's look at the rules:
The stock must have made a 60-day high within the past seven
1. 
2. A sharp three- to six-day sell-off must then ensue.
3. Yesterday, the stock must have risen above the previous day's high,
trading sessions.
giving  us the beginning of a  V-formation {the examples will  clarifythis).
4. 
Today only, buy 1/16 above yesterday's high and risk 1 point.
5.  Exit on the close. If the stock closes near the top of its range, you
may want  to hold  one-half overnight.
Here are five examples to leam from.
52 
Chapter 9
EXAMPLE  9.1  NOI
1.  National  Oilwell  makes  a  new  60-day  high  and  then  sells  offsharply for a few days (and has a very successful Gilligan's Island).
2.  The  upward  trend  resumes  (the  beginning  of  a  V)  with  a  5-point
rise for the day.
3.  Buy  1  tick  above  yesterday's  high  of  78  1/4  and  the  stock  closes
nearly 2 points higher for the day.
EXAMPLE 9.2  SLB
2. A sharp sell-off.
1. 
Schlumberger makes a 60-day high.
3.  A solid 4 1/8-point rise for the day.
4.  We  buy  at  89  7/8,  1  tick  above  yesterday's  high,  and  the  stock
closes at 92 1/4 as the momentum resumes.
54 
Chapter 9
EXAMPLE  9.3  POT
A new high followed by a sell-off.
1. 
The resumption of the upward move.
2. 
3.  Buy at 84  1/16 and the stock moves more than 3 points higher in-
traday.
EXAMPLE  9.4  HI
1. A 60-day high.
4. Buy at 138 1/2 and risk 1 point. It closes at the daily high, giving us
2.  A sharp sell-off.
3.  The beginning of the V.
little reason to sell.
5.  Another close on its high.
6.  Trades to as high as 144 before profit-taking comes in.
CONCLUSION
V-Thrusts  is  a  momentum-based  setup  that  identifies  strongly  trendingmarkets  which,  after  profit-taking,  resume  their  upside  move.  Manytimes  it  occurs in  stocks  that are heavily  shorted,  and  the  resumption  ofthe  trend  forces  the  shorts  to  run  to  cover,  pushing prices  even  further.
When you look at the charts of strongly trending stocks in the past, you
will see just how often this pattern takes place.
SECTION TWO
MORE STEPPINGIN FRONT OF SIZE™
If I could only trade one method, it would be Stepping In Front Of Size™. To me, it isthe simplest and most consistently profitable method I have created.
In the following three chapters, I will build upon the Stepping In Front Of Size™ strat-
egy I  taught in Hit and Run  Trading I.  Before moving forward, let's review the rules forthe original strategy:
FOR BUYS
1.  A stock must have an ADX reading of above 30 and its +DI greater than its -DI,
or the stock must have an RS reading of 95 or higher.
2.  The  average  daily  volume  for  the  stock should  be  under  200,000  shares  a  day.
The lower the volume, the more money you will make with this strategy.
3.  The  stock  must  be  trading  higher  for  the  day.  This  strategy  doesn't  work  for
stocks down on the day.
more than one institution trading this strategy. How do I know this? Because I
4. Most importantly, the buyer must show me he is impatient, or I must see there is
am waiting for two consecutive higher bid prices where there is size to buy. (Size
means 5,000 shares or more). For example, I want to see a market that has 5,000shares bid at 52 and 1,000 offered at 52 1/4. I then want to see the bid go to 52
1/8 or 52 1/4 with 5,000 shares to buy again. This means someone is desperatelylooking for stock.
5.  In  the  previous  example,  if  the  market  goes  52  1/8  bid  (with  at  least  5,000  tobuy)  and 52 3/8 offer, I will pay the offer side.  The only time I will ignore thishigher bid is if I see 5,000 shares or more offered there. This means there may be
6. My protective stop is 1/16 point under the price of the original 5,000-share bid
a seller who can accommodate a large buyer).
or if I see my new friend has been filled on his order, I will automatically take
my  profits.
What we  are attempting to do is to buy stock ahead of a very large buyer.  Because the
(52).
7.  Where  I take profits is very subjective. Many times,  if I  see size on the offer side
above strategy is done on thinly traded stocks, the likelihood of a large institutionmoving prices higher before he is filled is high.
Before moving on, I need to make one more point. This strategy also applies to short-ing downtrending stocks. Even though you need an uptick to get filled, the principlesstill apply. Just reverse the rules and you will be able to apply this method when a
bear market occurs.
CHAPTER 10
STEPPING IN FRONT OFSIZE  ON NEW HIGHSAND  NEW  LOWS™
Stepping In Front Of Size on New Highs  and New Lows™ is fairly sim-ple.  Each  evening,  you  must  first  identify  the  strongest  moving,  thinlytraded names that made a 60-day new high or low for that day. The aver-
age daily volume should be less than 200,000 shares/day, and the lower
the  volume,  the  better!  These  are  the  stocks  that  attract  the  momentumplayers  (both  to  the  upside  and  downside).  As  these  stocks  reach  newlevels,  the  momentum  players  dogpile  in,  pushing  these  stocks  furtherand  further.  Therefore,  we  want to  focus  on  this list  and  wait for  theseplayers  to  show their hand.  (Showing their hand means  two  consecutivehigher bids for the stock (for buys) to trigger our signal.) When this hap-pens,  we  step  in  front  of these buyers and,  after being  filled,  place  a  pro-
tective stop 1/16 point below the price of the first large bid (1/16 above
buy stock. You must remember though that it is extremely difficult to buy
the  offer for  sells).
What  is  happening  is  that  the  new  highs  (new  lows)  are  attracting  allsorts  of  attention  from  the  momentum  funds  and  panic  from  the  short-sellers.  These  two  groups  basically  trip  over  themselves  attempting  to
EXAMPLE 10.1 CVVC
large  blocks of  stock in  thinly  traded  stocks and  even  mare  difficult  whenthese  stockf  reach new  extreme  levels'. We, as  individual  traders, can buy500-1,000  shares  easily  and  participate  as  those  funds  battle  for  stock,pushing it higher.
Here are three examples which will help you understand the strategy
even  further.
and our protective stop is af 65 9/16, 1/16 under the original bid.
CWC  closes  the  day  at  68  7/8,  more  than  2  1/2  points  above  the
The  bid  is  raised  (on  sia?)  to  65  7/8.  This  triggers  our  buy  signal,
EXAMPLE  10.2  NOI
In  Front  Of Six  on  New  Highs  and  New  Lows™
1. NOI is at new highs, and a buyer bids for stock at 45 1/4.
2.  One minute later, the bid is raised triggering our buy and the stock
closes at 46 1/4.
62 
Chapter 10
EXAMPLE  10.3  EVI
1.  EVI has a buyer at new highs.
2.  The bid is raised, and we buy at 38  1/2 and our stop  is  at 38  1/16.
The stock immediately trades to as high as 39 7/8.
CONCLUSIONAgain,  this  is  a  simple,  fairly  low-risk  strategy.  Remember,  it  is  a  day-trading  strategy  and  positions  should  be  closed  before  the  close.  Also,
these stocks trade quickly, so please make sure you are disciplined withyour protective stops.
CHAPTER 11
"SUBSTANTIAL" SIZE™
STEPPING IN FRONT OF
In this chapter, I will teach you an advanced, and possibly the best,
method  to Step In Front Of Size™. I call it Stepping In Front Of "Substan-tial" Size™.
As we have discussed, when an institution tries to buy a block in a thinlytraded stock (daily volume under 200,000 shares), it many times pushes
prices  higher  until  it  gets  filled.  Most  times  (90  percent  of  the  time),
either the specialists or the trading desk working the order will only
show 5,000 shares  to buy and not let anyone know just how big the  orderis.  Sometimes (the remaining  10 percent of the time),  the specialist or the
trading desk will show a bid for 10,000 or more shares. At these times, I
ping In Front Of Size™ strategies. I will immediately step in front of the
price. This means that if there is initially 10,000 shares or more to buy at
this strategy). A bid of 10,000 shares or more on a thinly traded stock
will not wait for them to  raise the bid again  as I  do with  the other Step-
bid  and  buy  stock.  I  will  then  place  my  stop  1/16  under  the  large  bid
58  1/8,  I  will  buy  on  the  offer  and  my  stop  will  be  placed  at  58  1/16(please  remember  that the  stock must be up  for the day before trading
tells  me that  there  is  a  high likelihood  the buyer  is  going to have  to  pay
higher to get filled. Sometimes, as you will see from the following exam-
ples, they pay much higher.
The  average  daily volume  for SDG  on March 31,  1998, was in  the 95,000share range.
1- 2.  A 40,000  share bid at 82 5/16.  Buy at 82 7/16 or higher and place
your initial stop at 82  1/4.
3.  The stock explodes more than 4 points over the next 90 minutes.
EXAMPLE  11.2  ETH
Stepping  In  Front  Of  "Substantial"  Size™
The average daily volume for ETH on April 1, 1998, was 174,000 shares.
1-2.  A  10,000  share bid  at 60 3/4.  Buy at 60 7/8  and 61  with your pro-
tective stop at 60 11/16.
3.  Buyers push the stock more than 2 points higher.
Chapter  11
CONCLUSION
CHAPTER 12
OFFERING KNOCK-
OUTS—AN ADVANCEDSTEPPING IN FRONT OF
SIZE™ STRATEGY
In this chapter, I will teach you an advanced variation I created for the
Stepping In  Front  Of Size™ strategy.  As  we have  discussed,  when an in-stitution  is bidding for size on a thinly traded stock, they can easily pushprices  higher before  they get filled.  This  is because  the  demand  of their
order exceeds the supply of stock available at current prices. By buying
and Run Trading I, I stated that the buyer must make two consecutive
ahead  of this  buyer,  you  are  often  legally  front-running  his  order.  In  Hit
higher bids with size  to  trigger our buy signal.  For this  advanced  strat-
egy, the rules are a bit different. We will be looking for a large amount ofstock on the offer side to be taken out (bought) to trigger an entry.
Here are the rules:
1.  NYSE or ASE stocks only
Chapter  12
10-day average daily volume must be under 200,000 shares per day.
2. 
3. 
4. 
5. 
Price  >  30,  ADX  >  30,  -i-DI  >  -DI,  or  RS  (from  Investor's  BusinessDaily)  is  95  or higher.
Stock must be up for the day.
If a block of stock (5,000 shares or more) is offered for sale, we willplace  a  buy  stop  order  1/16  above  the  offer  price.  This  means  that
if 5,000 shares are offered at 36 1/2, we will buy only if the stockthen trades to 36 9/16 or higher.
Exit on your own discretion and before the close.
7. 
6. 
If filled, risk no more than 1/2 point.
Here are three examples:
EXAMPLE  12.1  MCK
ring Knockouts 
69
1. A large seller offers stock at 104 3/4. We will place a buy stop or-
McKesson Corp. meets all our pre-conditions.
der at 104 13/16,1/16 above his offer.
The offer is taken out by buyers.
2. 
4. The buyer pushes MCK more than 4 points above our entry.
3.  Our  buy  stop  is  executed.  We  will  put  our  protective  stop  at  1/2
point under our fill.
70 
Chapter 12
EXAMPLE  12.2  MTG
71
Offering Knockouts 
1. A size seller at 63 1/4. We will place our buy stop at 63 5/16, 1/16
above his offer.
MTG pre-qualifies as a candidate.
buy stop order, which (3) now becomes a market order.
2.  Buyers take out the seller, and the stock begins trading through our
4.  Within an hour, the momentum buyers push the stock to as high as
64  1/4.
72 
Chapter 12
EXAMPLE  123  TXI
73
Offering Knockouts 
The stock is up for the day, and a large seller offers stock at 47
1. 
TXI is a strongly trending, thinly traded stock that meets all of our pre-
conditions.
11/16. We will place a buy stop at 47 3/4,1/16 above his offer.
2. 
The offer disappears,  and we  soon get filled  at 47 3/4.
3.  TXI explodes more than 2 points higher within a few hours as thebuyer(s)  push  prices  higher  in  their  attempt  to  accumulate  morestock.
CONCLUSIONWhy  are  we  doing  this?  Because  profit  taking  naturally  comes  into  a
strongly uptrending stock. If the sellers are immediately taken out by thebuyers, then it means even more buying will probably follow and pushprices higher.
Watch this strategy closely, as it has a fairly low-risk, solid return poten-
tial.
SECTION THREE
MORE REVERSAL
STRATEGIES
Reversal patterns on momentum stocks should be traded by only the bravest traders
who  are  comfortable  with  increased  risks.  As  you  are  aware,  stocks  drop  faster  thanthey rise. Momentum stocks drop even faster. These declines are accompanied by highvolatility, and you must be extremely nimble and quick to lock in gains.
hi Hit and Run Trading I, I showed you the Lizards and Gilligan's Island reversal strate-
the effort to learn.
gies.  In  the  following  chapters,  we  will  look  at  four  more  reversal  strategies.  Thesestrategies are a bit more complicated than the ones in the first book, but they are worth
DOUBLE STICKS
CHAPTER 13
EXPANSION RANGE
In this chapter, I am going to share with you a brand new setup I have
recently  begun  to  trade.  Expansion  Range  Double  Sticks  is  a  reversalstrategy that we  trade  for one  to four days.  It takes  into  account compa-
nies that have a panic-buying day and immediately following, a panic-
selling  day.  The  selling very  much  carries  over into  the  next  day,  and  itallows us a good short-selling opportunity.
Here are the rules:
1.  Day one (yesterday), a stock must make a 60-day high and its range
2. Day two (today) must close below its opening and its range must
must be at least the third largest range day of the past 10 days.
the day-two low and we will risk 1 point with a protective stop.
be at least the third largest range day over the past 10 days.
3. 
If rules 1 and 2 are met, we will sell short tomorrow, one tick under
4.  Use a trailing stop to lock in profits.
Let's look at five setups:
78 
Chapter 13
EXAMPLE 13.1  SB
The stock makes a new 60-day high and its range is at least the
1. 
The stock's range is at least the third largest range of the past 10
2. 
Sell short at 64 7/8, 1/16 under the previous day's low and our
3. 
third  largest  range  of  the  past  10  days.  {In  fact,  it  is  the  largestrange of the period.)
days and it closes below its opening.
stop is at 65 7/8, risking 1 point.
4. 
SB closes at 63 1/2 for a  1  3/8 point scalp.
EXAMPLE  13.2  RMBS
79
Expansion Range Double Sticks 
RMBS makes  a  new  60-day high  and  its  range  is  at  least  the  thirdlargest day range of the 10-day period.
A close below its opening and the range is at least the third largest
range of the past 10 days. We also have a multiple sell-short signal,
as it is also a Gilligan's Island setup.
Sell short at 46 15/16 and our protective stop is at 47 15/16. The
stock drops as much as 4 1/2 points intraday.
EXAMPLE  13.3  NOBE
2. A close below its opening and at least the third largest range day of
Sell short at 54 9/16, the stop is at 55 9/16 and Nordstrom closes
3. 
days.
the past 10.
11/2 points lower.
1.  A  60-day  high  and  at  least  the  third  largest  range  of  the  past  10
4. 
The second largest range of the past 10 days and a 60-day high.
5.  The  third  largest  range  day  of  the  past  10  and  a  close  below  its
opening.
Sell short for a quick profit.
6. 
EXAMPLE  13.4  CCK
Expansion Range Double Sticks 
81
1. Here CCK makes a 60-day new high on a large-range day.
The second largest-range day of the past 10 days and a close below
2. 
the open.
3. 
Sell short at 54.
4.  Closes at 51 3/4 the next day.
82 
Chapter 13
EXAMPLE  13.5  FDX
1. A 60-day high for Federal Express and its range is the largest of the
2. A close below the open combined with an expanding range.
past 10 days.
3. 
Sell short in the 70 3/4 area.
4.  A drop of as much as 7 points in a few days.
panic buyers causing an expansion breakout and then, when there is nofollow through, they sell out over the next few days. I do not feel this
CONCLUSIONI  feel  this  setup  works better  to  the  downside.  I believe  it  is  caused  by
setup has any long-term implications; it is simply a short-term phenome-non that lends itself well to a fairly low-risk trade.
One final note; as with all my strategies, I prefer to trade this setup with
higher priced stocks. This assures us of getting sufficient intraday rangeto profit from.
CHAPTER 14
BOOMERANGS
a pattern that evolves over a number of days. Since the strategy requiresmultiple days to set-up, the ensuing move is often explosive.
In this chapter, I am going to show you a reversal strategy that involves
breakout of this ledge. This breakout immediately fails and the stock
Boomerangs are a powerful setup as fast moves typically spring from false
The basic concept of the pattern is that a stock in a strong trend pauses ina  tight  consolidation  formation  (a  ledge).  The  stock  then  attempts  a
comes back in—hence the name Boomerangs.
moves. However, since the strategy fades the predominant trend, you mustbe diligent with stops.
The Boomerang and its rules are somewhat more subjective than theother Hit and Run setups since it takes time to evolve. However, I am
First, here are the rules for shorts (longs are reversed):
sure the following examples will clarify the strategy.
1. 
Identify a stock in a strong trend.  The  stock must be above its 50-daymoving average. The ADX will typically be > 30 as well. (Dependingon  the  period  of the  pause  or  consolidation,  the ADX may have  re-ceded somewhat.)
2. 
Identify a period of not less than 5 trading days and not more than20  trading  days  where  the  stock  consolidates  in  a  relatively  tight
range subsequent to the strong run.
3.  Day one, the stock breaks out above the consolidation.
4. 
The  stock then is  a  short  sale  1/16 below  the  low  of  the  breakoutday on either  day two,  three,  or four (i.e., up  to  three days after  thebreakout).
5.  Once  triggered,  hold  the  position  overnight  should  it  close  in  thebottom 25 percent of the range and use a trailing stop to attempt to
maximize the trade for a few days.
EXAMPLE  14.1  DELL
Boomerangs
DELL experiences a strong run from July to September.
1. 
2.  On 9/24, DELL begins a tight consolidation.
3. On 10/15, DELL breaks out of the flat top.
4.  DELL is a short any of the next three daysat977/16.
5. On 10/17, DELL trades as low as 91 7/8.
P.S.  Please  be  aware  that after a failing  three-day  rally,  DELL  imploded  to  as  lawas  73.
86 
Chapter  14
EXAMPLE  14.2  PG
4. 
PG  is a buy 1/16 above the high of the breakdown bar any of thenext three days (9/11, 9/12, 9/15).
5.  PG triggers a buy at 66 3/4 on 9/12.
6. 
The stock trades as high as 71 3/4 over the next two days.
EXAMPLE  14.3  KSU
Boomerangs 
87
3. Breakout day on 10/24; low of breakout day 33 1/4.
4. KSU is a short the next trading day, near 33 and closes at 29 1/4.
1. 
2. 
Prom 6/10 to 9/30, we see a strong trend.
Then a 17-day flat consolidation or ledge to 10/23.
88 
Chapter 14
EXAMPLE  14J  SLB
3. A reversal to go long. Note also this is an Expansion Range Double
1. A consolidation period near its lows.
2. A break to the downside.
Sticks buy  setup.  As I have repeatedly mentioned, multiple  setupsare the best setups.
4.  Nearly 10 points in a few days.
EXAMPLE 14.5  VRSN
Boomerangs
sion Range Double Sticks all happening at the same time!
Here is a Boomerang, Turtle Soup Expansion (Chapter 15), and an Expan-
1.  A breakout from a consolidation.
2.  A reversal back in.
3.  A solid three day profit.
CONCLUSION
out fails, these individuals quickly abandon their position, causing themarket to move in a panicky, exaggerated direction opposite the break-
out.
I have found that Boomerangs do a good job of identifying stocks that
have  attracted  weak  hand  breakout buyers  (or  sellers).  When  the  break-
CHAPTER 15
TURTLE SOUP
EXPANSIONS
In their terrific book. Street Smarts, Larry Connors and Linda Raschkedescribe two related reversal strategies they called Turtle Soup and TurtleSoup Plus One. The Turtle Soup pattern derives its name from the system
lows (for buys) often catch the breakout trend followers wrong-footed—hence the name Turtle Soup.
popularized  in the  1980s  that keyed  off a  20-day breakout  of prices.  Thereversals that occur from test failures of these 20-day highs (for shorts) or
I have benefited from trading the Turtle Soup and Turtle Soup Plus One
strategies and have added a twist of my own which, although occurringless  frequently,  I  believe  does a  good job  of identifying  which reversals
ultimately have a greater likelihood of profitability.
I call my strategy Turtle Soup Expansions.
Here are the rules for short sales (buys are reversed):
Today the stock must make a new 20-day high.
1. 
days earlier. This is important since we want to see a high, a re-
2. 
The  previous 20-day  high must have  occurred  at  least four trading
tracement,  and  a  subsequent  test  of  that  high  fail.  Establishing  atleast a  four-day  separation  between the two highs helps  to  ensureagainst shorting into a runaway move.
Chapter  15
prior four days, then tomorrow (Day Two) we will short 1 tick be-
3. 
If  the  stock  "comes  in"  today  or  tomorrow  reversing  below  theprior  20-day  high  and  has  a  range  greater  than  that  of  any  of  the
low the previous day's low. Use a 1 to 1 1/2-point stop initially anda trailing stop as the position moves in your favor.
Let's look at some examples that I am sure will clarify the picture.
EXAMPLE  15.1  CBR
1. A 20-period high and the previous high was more than four days
ago. Today's range is also the largest of the past four days.
2. We sell short 1/16 below yesterday's low.
3. A 4-point profit in three days.
EXAMPLE  15.2  DELL
Turtle Soup Expansion,
1.  A 20-period low.
2.  A  reversal  back-up  through  the  October  28  low  on  a  large-range
day.
3. Buy at 39.
4. A nearly 10 percent gain overnight.
94 
Chapter  15
EXAMPLE  15.3  SLR
1.  A 20-period high.
through the high of September 8.
2. 
The  largest  range  of  the  previous  four  days  and  it  trades  back
3. 
4. 
Sell short 1/16 under the October 3 low.
Five consecutive down days.
EXAMPLE  15.4  BTL
95
Turtle Soup Expansions 
1.  A 20-day high. The previous high was made nine days previous.
2.  A reversal back under the October 8 high on a large-range day.
3. 
Sell short 1/16 under the October 22 low.
4.  A  solid  sell-off ensues.
EXAMPLE 15.5 JDAS
96 
Chapter 15
1.  A  20-period  low  and  a  reversal  above  the  previous  low  made  on
January 13.
2.  Buy  on  the  opening  and  the  stock  explodes  more  than  6  points
higher intraday.
EXAMPLE  15.6  SOC
1.  A new  20-day  high.  The  previous 20-day high  occurred  more  than
four  trading  days before.
2.  After making a new high, it reverses back under the previous high
made on October 15.
3. 
Sell short at 47