<s> CHAPTER
OPENING THOUGHTS
When I sat down to write HJ! and Run Trading a lew years ago, I had noidea  it  would  have such an  impact.  1  knew  there was a  lack of informa-tion  available for short-term equity  traders.  I  did not know  that so manythousands of traders were craving this information.
I  have  heard  the  good  and  bad  about  my  first  book.  The  bad  stemmedpredominately  from the few people who hoped to  turn £5,000 into mil-lions. That is never going to happen with my strategies. The good  cameIrom  the  many  traders  who  have  taken  the  strategies  and  grown  theiraccounts. An extreme example was told to me recently by a senior execu-tive at a major discount biokerage firm. He stated one of their customers,
530,000  to  over  $300,000  in  24  months.  This  performance  is  astoundingand E could only hope for IE to happen to me someday!
Hi!  and  Run  Trading  is  about  momentum  trading.  It  is  about  climbingaboard  strongly  trending  stocks  in  order  to  make  fast  profits.  It  is  aboabout  taking  very  small  risks.  This  is  done  with  tight  protective  stops.Recently,  Gary  Smith  from  TheStreetcom  traded  my  method  and  stated
using only one strategy from Ihe book, has grown his account from
Jeff's come up i
Hil and Run Trading /( is an advanced version of the first book. It is a
Gary is exactly right in his analysis. By risking small amounts in order tohopefully make larger amounts, the odds do get slacked in your favor.
ited. Stack those odds in your favor and you should get ex-
: 
win being greater than the average loss.
actly what  I  found:  more wins  than  losses, and  the average
the largest as it contains trend continuation patterns. These aie specific
culmination of patterns, concepts, and trading techniques to make you aneven  better  trader.  I have  broken  the book  into  four sections. The  first  is
setups  that  occur in  strongly  trending  stocks.  They are  meant  to be usedfor either day-trading or to be held for a few days as a move plays itselfout.
The second section contains, in my opinion, the most powerful day-trad-
ing  strategies ever  published  for equity  traders.  In  it you  will  learn  threeadvanced strategies to what 1 consider my best trading method. SteppingIn Front Of Si2e™-The third  section is made up of short-term reversal strategies for you  IDfocus on.  Reversals  on momentum  stocks come  quickly  and  these strate-
gies allow you to pounce on stocks as wrong-footed traders run for cover
trading even further. Stop placement, carrying positions overnight, trad-
In  the fourth  section, we  will  look  at  various  techniques to improve your
have also included an interview of me and more than 40 actual learning
share with you the many aspects c>f successful trading.
ing technology,  etc.  are just a  few  of the concepts  I  will  share  with you. 1
examples  taken  from  my  daily  trading  service.  All  combined,  I  hope  to
Now let's move on to the first section.
SECTION ONE
MOMENTUMCONTINUATIONSTRATEGIES
A  stock  in  motion  remains  in  motion,  until  proven  otherwise.  That  is  the  cornerstoneof  momentum  trading.  There  are  numerous  ways  to  exploit  this,  and  the  followingchapters are among the best.
The next eight chapters will help you further identify the correct names to focus onand will give you the proper entry method. Each chapter focuses on entering a mo-mentum stock in the direction of the overall trend. You will be climbing aboard thestrongest moving stocks and. with the use of trailing stops, slay in them while the moveoccurs. These moves can last for as short as a few minutes lo as long as a few days.
The other piece of the puzzle for each strategy is the constant use  of protective slops.Catastrophic losses can never be eliminated, but  they can be minimized. This  is doneby risking 1  point or less on a  trade.  You  cannot stop a  stock  from gapping overnight
. _
to trade each day. I have reprinted some of the rales in the Appendix to help remind you. 
in  the  opposite  direction (catastrophic loss), but you can protect yourself  intraday wiltthese stops. You will see that taking small losses is the difference between those traderswho make a consistent living and everyone else.
Please  note:  In  Hit  and  Run  Trading  I,  /  showed  you  how  to  correctly  identify  the  best  stocks
HOT IPO FULLBACKS
Chaffer  1
4. 
Place your initial protective stop at the previous day's low.
5.  Hold the position  from one to  five days using trailing stops.
Here are  five examples:
1. On September 18, International Network Services goes public at
After the pullback, we buy 1/16 above the high of September 30
3. 
$16/share and opens at 28 1/2. This qualifies as a "hot issue" as ittrades more than 15 percent above its offering price.
2. 
The stock has a three-day pullback.
and are filled  at 36 1/16. Our stop is near the previous day's low of35.
4.  We have an approximately 40 percent profit in a week.
Hoi 1PO Fullbacks 
7
protective stop is near the previous day's low of 49.
4. 
Three days later we have a  10-point profit.
8 
Chapter 2
EXAMPLE 2.3 SEAC
The stock rises more than 50 percent within a week and a half.
4. 
.£
The growth funds start buying and we get filled at 18 5/16. 
3. 
1. 
Sea Change International goes public at 15 and trades up more than15 percent.
2. 
A brief pullback as profit  takers come in. 
•  i -Uluu O1A 
£.
EXAMPLE  2.4  5CS
Hot IPO Fullbacks 
9
•;
I 
2. A three-day pullback. 
' -•.' -*
3. Buy above the previous day's high and risk 1/2 point. 
Steelcase Inc. is priced at 28 on February 18 and opens more than 5
1. 
points higher. 
i 
'.-.HI
>'•- • A 10 percent gain in three days. 
.t--i  --..'><\ •' •:• 
4. 
1. Global TeleSystems Group is priced at 20 and opens 30 percent
higher.
Apullback. 
;.  .ifoatfflwq  yeKwuU  A 
,E
Buy at  30 5/16 and risk 5/8  of a point. 
7'.o^/?vuJi 
.(,
2. 
3. 
.t
.-.,.,.-,, ,j'-rt>^ft4i'A 
A 20 percent gain in a week. 
4. 
Hot IPO Fullbacks 
11
CONCLUSIONLet's  again  understand  the  dynamics  of  this  setup.  Strong  demand  (i.e.,lots of excitement about the company's future) causes the stock to rise thefirst week.  Short-term  traders who were lucky enough to  receive stock onthe  offering  take  their  profits,  causing  a  pullback.  The  growth  funds,
advantage of the pullback, pushing prices higher. This is clean, easy, and
Finally, the other nice thing about this strategy is that you do not have tosit in  front  of a  screen  all  day.  Simply  placing a buy stop  with your bro-ker and giving him or her instructions to put in a protective stop for you
which did not get enough stock on the offering, then come in and take
very predictable.
' *
after the fill allows you to trade this setup while you are attending toother matters in your life. 
CHAPTER,
FLAT-TOP EXPANSION
BREAKOUTS
lit this Chapter, I am going to share with you how io identify the best
every day. IE is impossible to trade them all, and therefore it is advanta-geous to $v\vt| the ones thai are most lively lo toLkjiv  through.
The highest  pe^enlage  of  Espinsion  BreaVont thai  work come off what
I cjll flat-lops. Flal-Tpp EMpansicn Breabouls occur when marten trade
Stfel. explodes out of this position, it not only doe. it strongly, but it
moves can at timei bv evtiemely large, and being patient is the hey to
flattening of  tfu>  slock chart and Is a  period of  built-up  energy  When a
many  times continues  ID  nm  foi  two  To  Three consecutive days.  These
maximizing the gains.
Lei's loolt al five exampks of what Ihls setup looks like and how To Bade
14 
Chapter 3
EXAMPLE 3.1  JBL
® As you can see, after JBL made new highs on June 18, it traded side-ways for two weeks. © On July 3, it had an Expansion Breakout. ® Weenter the next day at 43 11/16- The stock closes strongly and moves an-other 3 points higher the following day.
EXAMPLE  33  CCU
I 
la-tap  EipppKHM  Bnnfcculs  15
rr  i timn/
1. On May 35, 1997, CCU made new highs and then traded sideways
It broke out on June 8 on an Expansion Breakout and then pro-
2. 
tor  two  weeks,
ceeded to move up to 58 over the next couple of days.
16 
Chapter 3
EXAMPLE 3.3  COM3
1. 
This  strategy  works  just  as  well  to  the  short-side-  On  January  26,1997,  the  stock  had  an  Expansion  Breakdown  after  trading  side-ways for three weeks.
2. in prices over the next two days.
This breakdown  followed  through for an additional  10  percent drop
EXAMPLE  3.4  LTX
1. Consolidation near its lows.
• '
2. An Expansion Breakdown- 
3. 
4. 
Sell short.
Trailing stops  Luck in a very solid gain.
18 
Chapters
EXAMPLE  3.5  AFL
1.  Consolidation in a tighl range.
2. 
An  Expansion  Breakout.
3.  Buy. 
-»a
4.  A 10 percent move in a few days.
CONCLUSION
Earlier, we discussed the problem of too many Expansion Breakouts in aday. Flat-Top Expansion Breakouts are the best way to overcome this
of days, you art looking at stocks that have built-up pressure in them.
problem.  By  focusing  on  stocks  that  have  traded  sideways  (or  a  number
When  ihis  pressure  explodes,  it  many  times  leads  to  solid,  substantial
REVERSAL NEW HIGHSMETHOD
Lei's  go  right  to  Ihc  rules,  and  we  will  Ihrn  distLiH  tine concept behindthe methodology.
FOR BUYS Bells Arc Reversed)
out. This can be as shor! as a few hours to as long as a few days.
4.  Use  a  trailing stop and stay in  the position  until  you  are stopped
Lei's look at five examples.
EXAMPLE 4.1  LU
60-day high.
1. On February 3, Lucent Technologies (LU) trades below the previous
day's low and above the previous day's high  lan outside day). Thedaily  range is the  largest of  five  days, and the  slock  makes a new
2.  Buy at 93 5/16,1/16 above yesterday's high,  and  the slock tradesup more than 2 points inlraday.
:i.
E X A M P L ES  BOX
'..' I'll-  •  a  "M.-/.I
Rnwsnl \«c  Highs Mrllwd 
21
Tile next day the slock trades tea
1.  On lanuary 21,  BDX has an outside day, trades to a  new 60-day
high, and its  range is the largest of five days.
Buy at 57 5/16 and risk 1 point.
22 
Chapter 4
EXAMPLE 4.3  YHOO
2. Buy at 63 1/4 and risk 1 point.
1. An outside day, 60-day new high, and a five-day range expansion.,
3.  The next day. Yahoo trades as much as 4 5/8 points above our en-
Also note the successful setup on December 5-8.
EXAMPLE 4.4  MAST
KnienalNaiiHigleMalail 
23
1.  MAST trades  under the previous  day's  lew,  then  trades  above  theprevious  day's  high.  Ite  range  is  the  largest  of  five  days  and  itmakes a now 60-day high.
2. Buy on Ihe opening, as the stock trades above the previous day's
high-
3. 
The trflnd  remains  intact.
24 
Chafle'4
EX  AMPLE  15  MWD
2. Buy I/ 16 above Ihe February 18 high.
1.  An  outside  day,  the  largest  range  of  five  days,  and  a  new  60-day
high.
CONCLUSION
ith  this  setup?  A stock  that  is  trading  near  newy  and  then  immediately  reverses.  The  reversal  ish moves in a latge range and again makes new highs. Thetum  is  pmeafvl.  and  il  often follows  through  far  the  net!  couple
CHAPTER
INTRADAY RELATIVESTRENGTH TRADINGSTRATEGY
In this chapter, 1 am going to share with you a strategy thai I have beentrading for many years. The Intiaday Relative Strength Trading Strategy
IRSTS seeks to exploit the seemingly magnetic attraction and pull-push
(KSTS)  is,  as  the  name  implies,  strictly  a  day-trading  technique.  The
relationship  between  many  high profile big cap  MASDAQ stocks and  theS&P  futures.  (Obviously,  there  is  a  powerful  link  between  many  listedstocks and  the intraday S&P action, but I have found  the technique easier
to capitali7e on when focusing on NASDAQ stocks.)
Let's take a look a[ some examples-
26 
C'nptrrS
EXAMPLE S.1  S4F 500
EXAMPLE 5J AMAT
Sir Futures plunged 10 points in the First half hour of trading. However,whereas [he S&Ps continue lo move lower. ® AMAT (Eiample 5.2) turnspositive on the day. Thii is the first sign of strength. What you want In
ffi As you  can  see  (Examples 5.1  and 5.1), on Wednesday, October  S,  Ihe
do is watch  the behavior of AMAT versus  the  futures  From  this  point.  Ifthe  Futures  continue  to  drop  and  AMAT  holds  firm  or  trends  slightlyhigher, you  want to be a buyer of AMAT any time the SiPs start to turn
I have found that often the mast profitable time oF day to rake advantage
oF  this  kind  of glaring  relative  strength  is  in  the  First  hour or  last hour.
Let's focus in on the lasl hour of trading on October 8.
The futures tested their morning low. $ but what did AMAT do during
Ihe drop? The stock barely hiccuped. If the test of the morning low in theFutures  proves  successful and  they start  to rally,  AMAT  is  going  up.  per-haps in a big way.
Once you  get  into  the  home  stretch,  the chance For another reversal  di-
rnarket  <£  AMAT explodes over  2  points in  the  last  hour of trading.  Asyou can see, the old saying "It they're rot going down, they're going up"carries even more significance than mighl appear lobe Ihe case.
EXAMPLES  SiP500Futu
EXAMPLE 5.4  I[*TC
29
/ Retain* SlmngUi Trading Strategy 
. a.irtu i "•'«--JJ,*  s.  -LTlt.'/.  '  I
Lef s look at another example (Examples 5.3 and 5.4) thai took place dut-ing the summer of 1997. On Friday, August 15, the SStPs had an ugly day,dosing down 20 points. <S On Monday, August IS, after a midday test ofFriday's low,  the S&Ps lake out the day's trading range going positive inthe  last  hour.  % Intel,  which  has  followed  the  S&Ps  in  tandem  all  day,forges ahead over 2 points in fhe last hour. As you can see, sharp late day
reversals (up or clown) can he wry profitable. Shorts caught complacent
(from the quiet afternoon) and wrong footed rush to cover rather than gohome with a position closing sharply against them. Sold out bulls stam-pede  in  to  get  long again.  The mixture usually  is explosive,  catapultingthe stock into the bell.
EXAMPLE  5.5  SAP SM  Fu
EXAMPLE  M  AMAT
Intnxtay Relolwt Strtngth Trading Strategy 
31
Let's look at a reversal to the downside (Examples 5.5 and 5.6), Here's
AMAT  again  on  September  18.  1997.  Although  the  S&Ps  gain  over  10points  by  midday,  AMAT  is  sluck  in  neutral.  The  stock  can't  attract anybuyers.  If  il  can't  make  any  progress  while  the  futures  are  running,
As  you  can  see,  once  the  futures  break  their  morning  support,  AMAT
what's going to happen if the futures reverse?
proceeds to plunge, CO losing more than 4 percent of its value in two andone-half hours.
can be made quickly.
CONCLUSION
When a  NASDAQ market leader is moving intraday  opposite the overallmarket,  it  is  often  telling  you  something.  When  the  overall  market  re-verses,  these  stocks  tend  to  move in  an  exaggerated  fashion,  and  profits
CHAPTER I
EXTENDED  LEVELBOOMERS
Extended  Level  Boomers  (ELBs)  are  multiple  inside  days  that  follownew highs or new lows. It is a stock that makes a new high (or new low)and is then followed by two or more  trading days where  prices contract.This  contraction  is  then  followed  by  a  breakout  in  the  original  overalldirection as the trend resumes.
Here are the rules for buys (short sales are reversed).
1.  Day one makes a 60-day high.
2. 
The next  two  days  and beyond,  the stock trades  under  or equal  tothe day-one high and above or equal to the day-one low.
Following the two days that the stock trades inside the day-one
3. 
high, place  a  buy  stop  (good  till canceled)  one  tick above  the  day-one high.
4. 
If the stock trades under the day-one low before it trades above the
day-one high, cancel the order.
5.  When filled, risk 1 point and use a trailing stop to lock in profits.
Here are four examples to help clarify the rules further.
2-6. The next five days, trade inside day on
Buy one tick above the day-one high.
7. 
1.  AOL makes a 60-day new high.
EXAMPLE  6.2  NC
1.  A  60-day new high.
36 
Chapter 6
EXAMPLE  6.3  CCIL
Two days inside the March 20 high.
Buy 1/16 above the March 20 high and v
profit  for  the  day.
1 
A new 60-day high.
2.  Tliree days inside the September 9 range.
3. Buy at new highs, and a strong close.
4. A Jack-In-The-Box setup (Chapter 8).
5.  Again, new highs.
CONCLUSION
As  with  the  original  Boomer  strategy,  ELBs  look  to  capitalize  on  trendcontinuations  that  occur  after  markets  rest.  Because  we  are  only  risking1  point, our risk is low; and because we  are trading a breakout pattern.
CHAPTER .
NON-ADX l-2-3-4s
One of my favorite one-to-three day strategies is the 1-2-3-4 setup. With
days and then resume its trend. The best way to identify a strongly
ADX reading be above 30, as this tells me the stock is moving solidly inone direction. The only drawback to using such a rigid mechanical ap-proach is that it many times misses stocks which are clearly trending. The
a  1-2-3-4,  we  are  looking for  a  strongly  trending  stock  to  rest  for  three
trending  stock  is with  the ADX  measurement.  Ideally, I want to  see  the
which are clearly moving strongly in one direction but do not have an
ADX is a slow, lagging indicator, and it takes quite some time for a stockto achieve a  level of 30 or higher.  In order to participate in those stocks
ADX  reading of 30, you can from time to  time be flexible  and  use some
discretion. As you will see from the upcoming examples, your eyes can
also detect  the  trend,  and  it becomes your expertise of identifying  thesesituations  that allow  you  to  profit  from the  setup.
On  the  following  pages  are  five  Non-ADX  1-2-3-4  setups  that  illustratethe potential  of this strategy. Also, please note that this is not a scalping
strategy. It often leads to explosive moves, and using trailing stops allowsyou to stay with the move.
40 
Chapter 7
EXAMPLE  7.1  NIN
under its 50-day moving average (for sells) and above its 50-day mov-
Nine West Group develops and markets women's footwear.
With  the  non-ADX  1-2-3-4  setup,  ideally I  want  to  see  a  stock  trading
ing average (for buys). This gives me a good feel for the trend.
In this example, NIN has an ADX reading of only 24 (on April 24) but the
moving average but has also lost nearly 20 percent of its value in the past
stock is  clearly trending  lower,  as  it  is  not only  trading  under its  50-day
six weeks.  (A)The  downtrend  was broken  for  three  days  (1-2-3),  and(e)on  day  four,  the  overall  trend  resumed  as  a  sell  signal  is  triggered  at
41 15/16 (1/16 below the day-three low).
EXAMPLE  7.2  EVI
Non-ADX l-2-3-4s 
41
Here we have a stock whose ADX is under 30 but is trading well above its
50-day  moving  average.  Please  note  the  stock  is  also  trading  at  all-timehighs, signifying the strong trend. (A)On April 24, we begin a three-daypullback from new highs before(s)a two-day resumption of the trend.
EXAMPLE 7.3 DELL
42 
Chapter 7
average, and yet the ADX reading was only 17! (A)Here we have a pull-
Notice again  (April  8)  a  stock at all-time highs,  above its 50-day moving
(g)as much as a 6-point profit over the next two days.
back,  and on April  15, we have a resumption of the trend, which leads to
EXAMPLE 7.4 ADFT
Non-ADXl-2-3-4s 
43
1.  A  10-point  drop  in  two  days  lets  us  know  the  trend  is  definitely
down.
2.  A 1-2-3 rise.
3. 
4. 
Sell short 1/16 under the December 9 low.
The stock loses more than 5 points in a couple of days, as the trendkicks back in.
44 
Chapter 7
EXAMPLE  7.5  WLA
3. Buy 1/16 above the June 18 high. Notice that at the close, we also
have an Expansion Breakout. There is no reason to sell this stock
today.
stantial gains.
4.  New  highs  and  profit  taking  comes  in.  Trailing  stops  assure  sub-
1. 
Strong upward trend as the stock makes new highs.
2.  A 1-2-3 pullback.
Pullbacks on strongly trending stocks are an inherent feature of the stockmarket. Waiting for and identifying pullbacks on the correct stocks is, in
case, my discretion is well grounded as it is based on proven trading
principles.
my opinion, one of the very best ways to trade the market.
CONCLUSIONI  attempt  to  be  as  disciplined  as  possible  with my  trading  rules,  but  atrimes  discretion  allows  me  to  take  my  trading  one  step  further,  hi  this
CHAPTER 8
JACK-IN-THE-BOXSTRATEGY
strongly trending stocks. In this chapter, I will teach you my Jack-In-The-
As  I  have  mentioned,  I  am  a  big  believer  in  trading  pullbacks  on
Box strategy.  This strategy identifies a  one-day pullback from breakouts.Following this one-day pullback, markets then again explode.
RULES FOR BUYS (Short Sales are Reversed)
2. The day after the XBO, the market must contract and trade inside
1. A stock must make an Expansion Breakout (XBO). This means it
must make a 60-day high and its range must be the largest range of
the previous nine trading sessions.
the XBO day's bar. That means its high must be less than or equalto  the  XBO day's high and its  low  must be more  than or equal tothe  XBO  day's  low  (this will  be  more apparent when you  see  theexamples).
3. Buy the day after the inside day, 1 /16 above the XBO day's high
4. If the stock closes strongly in the top of the day's range, hold at
least half your position overnight, as it is likely to follow through
and risk 1 point.
the next day.
46 
Chapter 8
EXAMPLE  8.1  OLN
3. Buy at 46 7/16,1/16 above the September 16 high. The stock trades
1.  Olin Corporation has an Expansion Breakout.
2.  An inside day.
more than 1  1/2 points higher, and profits should be locked-in nearthe close.
2. 
An  inside day.
Sell short at 45 7/16, 1/16 under (he April 21 low, and it do.
3. 
short entry point.
48 
Chapter 8
EXAMPLE  8.3  SDG
Sofamor Danek Group makes a 60-day high, and its range is the
1. 
largest of the past nine days.
2.  An inside day.
3.  Buy  1/16  above  the  September  16  high  and  risk  1  point.  On  the
close, lock in  profits on one-half and hold the  other half overnight.
4. 
The  stock  trades  as  much  as  3  points  above  our  entry,  and  profitsshould be locked into as profit taking comes in.
EXAMPLE  8.4  ALD
49
!ack-In-The-Box Strategy 
1.  An Expansion Breakdown.
2.  An inside day.
Short 1/16 below the October 22 low and risk 1 point.
3. 
4. A close at the bottom of the range.
5. A gap lower and a trailing stock locks in solid profits.
50 
Chapter 8
EXAMPLE  8.5  OCR
2. The Lizard/Gilligan never triggers (implying lack of selling pres-
1. 
This  is  an  interesting  setup.  We  have  an  Expansion  Breakout,  yet
3.  Buy and a close at the day's high.
4.  Another strong close.
5. Another strong close.
6. 
Lock in profits.
CONCLUSION
This is a very solid strategy to trade. The one-day pause after the Expan-
sion  Breakout  is  normal  and  is  then  followed  by  the  next  wave  of  mo-
CHAPTER .
V-THRUSTS
ence a sharp selloff and then thrust higher. The setup combines some of
I am going to  share with you a new pattern I have recently begun trad-ing.  V-Thrusts is a setup that occurs after strongly trending stocks experi-
the  same  concepts  as 