[isatrader]

Do you find better return with continuation breakouts or the initial breakouts?

For me personally, I prefer to trade Stage 2 continuation breakouts, as although the opportunities for a large percentage move seems greater at the Stage 2A entry point, you have to factor in the time component also (opportunity costs), as compounding smaller returns can be more profitable than single large moves that you have to hold for up to a year or more. As an early Stage 2A breakout can take many months, and because it's early in the trend change, there's a high percentage chance of it pulling all the way back the breakout level and even below it. Which is shown in the investor method diagram from the book as the B entry point. I've found that this early part of Stage 2, which is know as the Stage 2A sub-stage, can take up to 6 months in a lot of stocks, before it finally works through all of its prior resistance and is ready to move higher in the Stage 2 advancing stage.

So the first Stage 2 continuation breakout is the first point at which I'm normally interested in a stock, as by this point the key moving averages are all trending higher, and the stock has worked off prior resistance. You can also assess the volume coming in since the initial Stage 2A breakout, and whether it contracted appropriately on the pullbacks as it's moved higher, and see if the relative performance versus the S&P 500 is strong and above a rising zero line.

So in my opinion, trading the early Stage 2 continuation breakouts is lower risk, as you are focusing only the higher quality setups already in Stage 2, and you can manage your entry better as the volatility contracts.