Momentum Breakout

Momentum Breakout looks for the classic footprint of institutional accumulation: a durable uptrend, a tight volatility-contracting base near the highs, and a volume-backed breakout — but only in a healthy (risk-on) market. It is primarily a scanner (GET /api/scan?strategy=momentum_breakout) returning today's matching stocks, each with a full trade plan.

Best for

Healthy, risk-on, trending markets with clear leadership, where clean breakouts follow through.

Avoid when

Choppy or risk-off markets and low-liquidity names, where breakouts fail and reverse. The market-regime filter suppresses signals in risk-off tapes to mitigate this.

Market behaviour exploited

Institutional accumulation — buyers stepping in with size after a quiet consolidation tend to keep pushing price.

Durable uptrends, tight bases and volume expansion cluster around real accumulation. Requiring all of them — plus a rising 200-day trend and a risk-on market — filters out most low-quality breakouts. Inspired by the shared principles of classic momentum traders (Minervini, Kullamägi, O'Neil, Darvas) without copying any one method; every rule is a fixed numeric test.

Entry — a BUY requires ALL of (evaluateMomentumBreakout)

1. Market is risk-on (Supertrend regime).
2. Close above the 50-day SMA.
3. 50-day SMA above a rising 200-day SMA.
4. Within 10% of the 52-week high.
5. A tight (~≤15% deep), volatility-contracting base over ~20 days.
6. Close above the base high (the breakout).
7. Breakout volume ≥ 1.5× the 50-day average.

Entry = the breakout close; stop = the base low (an objective structural stop, reported with a risk %). The live scanner defines no timed exit.

Backtest methodology (universe)

Because it is cross-sectional with no single-symbol timed exit, the backtest:

• runs the real entry rules (regime-gated, as-of each session) across a fixed universe of 42 liquid US large-caps,
• applies one explicit, documented exit — a close back below the 50-day SMA (a standard trend-following exit that exists only in the backtest; the live scanner is unchanged),
• pools every symbol's round-trips and summarises them.

Deterministic, from buildConfidence. confidenceScore is a setup-quality measure (0–100), not a probability of profit. On /api/scan it is populated per match; the live /api/strategies state is neutral (null) and points you to the scanner.

A bare BUY ≈ 73 (Good); a textbook breakout → 100 (Exceptional). Bands: <70 Weak · 70–79 Good · 80–89 Strong · 90–100 Exceptional.

The scanner returns the labels of the rules that passed (a full BUY shows all of):

• Market risk-on
• Above 50-day MA
• 50-day MA above 200-day MA
• 200-day MA rising
• Within 10% of 52-week high
• Tight consolidation base
• Volatility contracting
• Breaking out above base
• Volume surge (≥1.5× average)
• Enter at the breakout close; stop at the base low; manage the exit yourself (the backtest uses a 50-day-MA exit).

• Positive expectancy from asymmetric payoffs — PF 1.37 with big winners despite a low win rate.
• Objective, no-chart-reading screen of institutional-quality setups, gated by market regime.
• Real structural stop at the base low (risk % reported) — objective risk management.
• Cross-sectional — scans a whole universe for leadership, not a single instrument.

• Low win rate / negative median trade — psychologically hard; most trades lose a little.
• Whipsaw-prone in choppy/risk-off tapes — failed breakouts; the regime filter helps but doesn't eliminate them.
• No portfolio-level drawdown from the pooled backtest (see §4) — sizing/risk-of-ruin must be managed by the trader.
• Costs matter — frequent trading; the close-to-close backtest models no commissions/slippage.
• Fixed backtest universe — 42 large-caps, not the full shifting S&P 500 (chosen for reproducibility and live speed).

• Universe backtest, not a portfolio. Per-trade stats are honest; portfolio return/drawdown are a labelled pooled-sequential proxy (§4).
• Heavier endpoint. /api/backtest?strategy=momentum_breakout fetches the whole universe, so it is slower than a single-symbol backtest.
• Backtest exit ≠ live rule. The 50-day-MA exit exists only in the backtest methodology; the live scanner is entry-only (with a base-low stop).
• Single-vendor, close-to-close. Yahoo prices; 2005–2026; no costs modelled.