ON DECK FOR TODAY’S VIP TRADE ROOM:
JOIN US HERE!
There’s a setup most traders love that I won’t touch — and it’s not because I’m conservative or risk-averse. It’s because I’ve learned to ask one critical question before entering any trade…
What happens when this goes wrong?
I was looking at Lululemon (LULU) recently, watching it attempt a breakout after weeks of decline. On the surface, it looked decent — volume was there, the move had some conviction.
But I passed on it completely, and here’s why.
The Problem With Breakouts in Downtrends
When you buy a breakout in a downtrending stock, you’re trading without a parachute. If that breakout fails — and statistically, most do — you fall right back into the established pattern of lower highs and lower lows.
Think about what that means for your risk management. In a downtrend, every rally gets sold into, creating a series of lower highs. If your breakout attempt becomes just another failed rally, the stock will likely continue its descent with no meaningful support underneath.
That’s not trading — that’s hoping. And hope isn’t a strategy.
Why Uptrending Stocks Give You a Safety Net
Contrast that with buying a pullback or breakout in an uptrending stock. If that trade fails, where does the stock go?
It reverts back into the uptrend, giving you another opportunity. You have a cushion — a support structure that works in your favor even when you’re wrong.
This is a concept that 90% of beginners completely miss. They see a stock moving higher and assume that’s all that matters. They don’t consider the underlying trend structure or what happens when their thesis breaks down.
The best traders I know aren’t just right more often — they lose less when they’re wrong. Part of that comes from understanding trend context and having a “parachute” when trades don’t work out.
Don’t chase breakouts in broken stocks. Find your edge in trending names where the math works in your favor, not against it.
I hope that helps!
Roger Scott
Roger Scott Trading
Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
- Telegram:https://t.me/+_vmfwkeP8fA5YWQ5
- YouTube:https://www.youtube.com/@Roger-Scott/videos
- Instagram:https://www.instagram.com/thetradingpub/
- Facebook:https://www.facebook.com/TheTradingPubOfficial
- Twitter: https://twitter.com/Rogerscott1970
Important Note: No one from The TradingPub team or Roger Scott Trading will ever message you directly on Telegram.
P.S. A Little-Known ‘Wealth Window’ Just Opened on 1 of the Hottest Stocks In the Market
History shows this stock has surged double digits during the first two weeks of October — and a similar setup could be forming again right now…
I’ll reveal the stock FOR FREE, and fill you in on a major breakthrough behind these “Wealth Windows.”
We develop tools and strategies to the best of our ability, but no one can guarantee the future. There is always a risk of loss when trading. The profits and performance shown are not typical. The trades expressed are based on historical signals from the Data Mining Software to demonstrate the potential of the trading tool. While we have been using the Data Mining Software with great success, we cannot guarantee any future results.
