Zanger’s Price/Volume Strategy
Dan Zanger first came to the attention of the media when Fortune magazine featured him the December 2000 issue. The featured article, “My Stocks Are Up 10,000%” told of his rags to riches story when this simple pool contractor turned professional trader by turning $11,000 into $42 million within two years.
So how did he do it? Zanger uses volume and chart patterns as the main criteria in stock selection. He mostly avoids technical indicators, but instead looks for high momentum stocks with 2-3 times the average daily volume exhibiting pattern breakouts. Some of the patterns he uses most are head and shoulders, cups and handles, rising and falling wedges, triangles, and flag and pennants.
In addition, Zanger looks beyond technicals to the fundamentals. Zanger looks for companies with rapidly increasing earnings, a new product or service, strong management and dominance in their market.
A typical day for Zanger is sitting in front of his six flat screen monitors watching the price and volume movements of the selected stocks that have passed his trading criteria. Zanger also spends a large amount of time on the phone with any one of his three brokers when any of the stocks on his watchlist are on the move.
Every night Zanger scans 1,400 stocks looking for the next days trading prospects. Using his strategy, Zanger has shown a knack for locating high-alpha stocks that lead the market, particularly during a major market move to the upside.
Zanger’s final advice is “Trading for me is all about volume and price action. I buy on pattern breakouts when volume is rising, and as long as price is responding well to increasing volume, I stay on board. But when either price or volume stops rising, it’s time to get out.”