Connor Bates' 6-Rule Framework for Trading Parabolic Moves

1. The Six-Rule Super Stock Criteria

Connor introduces framework for identifying outlier stocks that make massive moves: (1) large daily/weekly bases where institutions accumulate, (2) linear price action respecting moving averages, (3) 80-100M daily dollar volume minimum for institutional following, (4) 5%+ ATR to ensure 5-10% daily moves, (5) hot thematic narratives where 50% of movement comes from sector strength, (6) catalysts like earnings beats with strong market reaction. The goal is narrowing down thousands of stocks to find the best merchandise.

2. Five Entry Tactics & Setup Playbook

Connor details five repeatable entry points: (1) base breakout with tight area below breakout level (cup-and-handle formations), (2) continuation flag after 100% move followed by <20% pullback (high-tight flag), (3) pullback to ascending 50-day SMA during uptrend, (4) episodic pivot gap-up on earnings with catalyst beat after period of neglect, (5) undercut and rally during market weakness where stock undercuts support then reclaims it. Each setup recurs throughout a stock's life cycle, allowing multiple entry opportunities.

3. SanDisk Case Study: $50-$725 Move

SanDisk spun off from Western Digital on Feb 14 as pure-play memory stock for AI (80M+ volume, 5%+ ATR, hot theme). Connor entered high-tight flag at $135 after 100% base breakout move (moved ~30% before entry kept risk tight). Stock rode 5-day SMA showing extreme linearity, never breaking 21-EMA, providing triple-digit gains in <1 month. Sold into strength at $300 on earnings gap, trimmed remaining position using 21-EMA break. Key lesson: don't think stock extended when chart structure shows early move; trail position on weakness rather than selling all at top.

4. Rocket Lab & Space Theme: Multiple Setups

Rocket Lab showed 70% multi-year base (2021 top to consolidation) before volume spike and moving average positive alignment (10-week above 30/40-week). Bought undercut-reclaim setup when stock held rising 21-EMA after Trump signed space executive order + Elon floating SpaceX IPO (two major catalysts). Entry gave 60-70% move with very tight stop. Market weakness caused trim on 21-EMA break. Example demonstrates how undercut-rally setup works best when broader market pulls back but stock shows relative strength.

5. Planet Labs: Episodic Pivot Pattern

Planet Labs had massive weekly base (10-week SMA trapped below 30/40-week) until December highest-volume-ever day when 10-week crossed above 30/40-week. Earnings gap (high-volume-close reclaim at $5.96 level) provided entry. Stock traded linear, never breaking 21-EMA. Second earnings gap with double-beat-raise gave 70% move; Connor bought five-minute opening range break with stop at low-of-day. Key principle: first 3-5 days of move show highest momentum; can finance risk early and sell half on first close below 10-SMA, trailing rest on weakness.

6. Bloom Energy: Seven-Year Base + Thematic Catalysts

Bloom Energy consolidated for 7 years with 30% short interest before gigawatt fuel agreement catalyst (+60% on 500% volume). Later gap-up on Oracle data-center partnership (+22% on 400% volume) broke out of base on volume—sign Wall Street had to rerate stock. Connor entered flag breakout at $45 (4% risk in fast-moving stock), rode 10-day SMA, and sold into strength at gap-down through 10-EMA. Demonstrates patience watching stocks in universe watch list until right setup appears.

7. Thematic/No-Fundamentals Plays: Quantum & Nuclear

Quantum computing stocks (no earnings, lose money, 10 years away) offered velocity-driven swing trades despite lack of fundamentals. September 2024 saw quantum group (IQ, Regetti, QBTS) show similar year-long base setups. Q broke out with volume, never broke 5-SMA, delivered multi-day push. When weakest name (QBTS) broke out, signaled group exhaustion. Similarly, OAKLO (nuclear energy theme, high-beta) showed tight consolidation before explosive move. Lesson: hype and thematic momentum can sustain moves 30-40% in 5 days even without earnings growth; useful for swing-trade compounding.

8. Market Awareness & Selectivity

Connor emphasizes setups don't work equally in all market conditions. During big range-bound markets, moving average slopes flatten; best opportunities come in strong uptrends (QQQ above rising 21-EMA or 50-day SMA). When QQQ in downtrend, leaders scarce and win rate drops significantly. Undercut-rally setup works when market weakens but individual stocks show relative strength. Must track market environment daily via QQQ and group monitoring to know when execution odds are best. Selectivity means only trading best merchandise; small losses until catching one 100%+ move covers all losses.

9. Risk Management & Position Sizing

Connor sizes positions so maximum loss is 5-6% per trade or <1% of AUM, while reward potential is 60-70% or multiple multiples. Uses tight stops at base lows or pre-breakout support levels. Sells into strength in first 3-5 days (highest momentum phase), selling half on first close below 10-SMA or at 10-ATR extension above 50-day. Trails remaining position on moving average breaks or weakness signals. Buying extended-looking stocks requires conviction in chart structure, not price alone; only need handful of 100%+ gainers yearly to have excellent year. Never tries to pick exact top; lets market tell him via price action and moving averages.

10. Real-Time Execution & Avoiding Hindsight

Connor emphasizes trades shown are real-time executions in TurboAction (manages client money), not hindsight. Five-minute opening range break on earnings gaps, undercut-reclaim setups, and high-tight flags are mechanical rules anyone can scan and execute in morning or during market hours. Key hurdle: discipline to follow criteria when stock looks extended; most people think they're smarter than moving averages, let opinions override signals. Also requires market awareness to avoid trading in weak tape. Example: SanDisk at $135 looked extended after 30% move, but chart structure showed early, linear move with tight risk—required conviction to ignore sentiment and buy weakness.