When a strong stock fires a squeeze to the upside there is typically the potential for five to eight bars of momentum. This means when a weekly squeeze fires long there is the potential for five to eight weeks of momentum, while a daily squeeze has the potential for five to eight days of momentum.
Weekly squeezes are one of the most powerful setups a stock can form as the energy building up inside the squeeze can often lead to weeks, if not months, of continuous momentum. This giant “wave” of momentum makes for an ideal time to build long positions either before or after the squeeze fires.
Setups based off lower time frames often have a stronger likelihood of firing long when there is a weekly squeeze releasing significant energy in the background. Daily squeezes in particular are one of the best times to build a position in an attempt to catch the continuation of the weekly squeeze power. A squeeze on the daily chart is often the moment in time when a stock is gearing up to make a bigger than expected move. Once a weekly squeeze has fired I am looking for a daily squeeze at the 21 exponential moving average (EMA) to start building my position.
To take things a step further, 4-hour squeezes are the moment in time for a strong move inside of the daily squeeze. When a bullish 4-hour squeeze fires to the upside inside of a daily squeeze, it can often cause the bigger time frame to fire its squeeze as well. Entries in a 4-hour squeeze allow us to build our positions during the quiet chop as opposed to chasing the stock once it begins to run higher.
What we are looking for here is the “domino effect” of energy being released on multiple time frames. Even in a volatile market NFLX proved to be a textbook example of a bullish triple-squeeze over the last couple of weeks. This made for a great trade in the Compounding Growth Mastery. If you are new to the squeeze, begin to approach your prep with this “top down” approach, looking for squeezes on larger time frames to provide the momentum needed for squeezes on lower time frames to get moving!
At the moment, TSLA is another example of a triple-squeeze with squeezes on the weekly, daily, and 4-hour time frames. This is one we’ll be keeping a close eye on into next week, especially with earnings around the corner. We were able to buy back our put credit spreads on the stock this week for a profit, but we think there is more gas left in the tank. Don’t forget to join us for pre-market prep on Monday morning on the Focused Trades YouTube channel as we’ll take a look at TSLA, the indexes, and much more!
Stay Focused!