After studying the stock market for many years, I have identified 14 unique stock market behavior patterns. Although the proprietary behavior patterns are similar to traditional technical chart patterns, they are not the same. The patterns, once identified and observed, give clues to market direction.
The 14 behavior patterns appear repeatedly on a chart, and are a lot easier to spot (and name) than traditional patterns. One of these patterns is the most powerful pattern in the world and can be a huge moneymaker. If all you did was trade this one behavior pattern, you could make a decent profit. The key, however, is identifying it correctly.
The name of this pattern is the “Steamroller.” To be more specific, it is the Bullish Steamroller (another behavior pattern is the Bearish Steamroller, but that will be saved for another day).
When you look at the Bullish Steamroller on a chart (a one-minute line chart is my preference because it’s easy to visualize the behavior pattern), you see a strong uptrend that begins slowly in the morning that builds strength as the day progresses.
The Steamroller pattern appears on charts of both individual stocks and indexes such as the S&P 500 SPX, +0.16%, and ETFs (exchange-traded funds) such as SPDR S&P 500 ETF Trust SPY, +0.17% and Invesco QQQ Trust QQQ, +0.09%.
Not just any ordinary uptrend
Some technicians might say, “Oh, it’s just an uptrend,” but the Bullish Steamroller is not just any uptrend — it has unique characteristics.
For example, although there may be turbulence along the way, the Bullish Steamroller gets stronger and stronger as it moves higher, especially after midday. To be a true Bullish Steamroller, it will be unstoppable right until the close. That’s how you know it’s the real deal.
The Bullish Steamroller will also reject any attempt by short sellers to stall or reverse its direction. If you are a short seller, it would be wise to not fight a Steamroller pattern as it is easy to get mowed down.
On March 1, for example, the futures market pointed to a higher opening for U.S. stocks. That was a clue a Bullish Steamroller could develop later that morning. As expected, the market zoomed out of the starting gate. It was a perfect day to go long with certain stocks or call options. In fact, anyone who bought into the Steamroller pattern within the first hour made out very well, especially with Invesco QQQ Trust, SPDR S&P 500, Wayfair W, -1.20%, and Etsy ETSY, -2.24%. Each of these enjoyed a Bullish Steamroller behavior pattern that day.
How to ride the Steamroller
A Bullish Steamroller usually lifts all of the leading stocks higher. The first clue that a Steamroller may develop is when the futures market is pointing to a strong opening (more than 1%). The odds are good, but not guaranteed, that a Bullish Steamroller will emerge that day, and sometimes in the first hour of trading.
The biggest risk when trading a Steamroller pattern is if there is an unexpected intraday reversal. Although the Bullish Steamroller rarely reverses, it can happen if there is negative breaking news. Yet the odds of a reversal are slim because most market participants, including institutions, day traders, investors, hedge funds, and algos have been buying into the strong uptrend.
Don’t make the common mistake of climbing onto a Bullish Steamroller too early, because many times the market starts off strongly but then loses steam within the first hour. To be a true Bullish Steamroller, the indexes (or individual stocks) must continue to move higher with only temporary pullbacks.
Often, the Bullish Steamroller develops later in the day. For example, the market might meander for the first hour and in midmorning turn into a strong Bullish Steamroller, and then mow down everything in its path.
Also, don’t confuse the Bullish Steamroller with a stock that gaps up at the open. Stocks or indexes that gap up are not Bullish Steamrollers. In fact, stocks and indexes that gap up at the opening bell sometimes reverse direction within minutes — what I call “one-minute wonders.”
Finally, a Steamroller does not appear every day. Patient traders wait for bullish market conditions before trading the Bullish Steamroller pattern. It is not designed to be traded every day, but only on the days when everything (technical analysis as well as the overall market environment) line up correctly, and all systems appear to be “go.”
The good news for investors and traders is that in the right market environment (typically during a bull market), the Bullish Steamroller can last not just for a day, but for a week or longer. If you are an investor or long-term trader, you can make excellent profits just waiting for a Steamroller day, and then buying.
Michael Sincere (michaelsincere.com) is the author of “Understanding Options,” Understanding Stocks,” and his lastest, “Make Money Trading Options,” where he introduces all 14 behavior patterns and the Test Trading Strategy.
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