The strategy for the Submarine Basket has remained the same since inception: find quality stocks that have pulled back to a solid Support area. This support area could be a number of different things:
prior breakout level
horizontal line that is part of a chart pattern like: head n’ shoulders, a Cup, a Wedge, a common trend-line, etc
A few comments about the selection and trade design that is implemented in chosen candidates:
1) I prefer to use Options and specifically will utilize a Bull Risk Reversal (long a Call Spread or Call Fly & short Puts)
2) There are dozens of stocks that meet my criteria each week so the filtering process does take work. One of the first filters I start with is Options (making sure of liquidity, bid/ask gaps, etc).
3) I often see the opportunities arise after an Earnings report
– DM 9:30 AM CSt