The short version
Dan Zanger trades breakouts from chart patterns in the market's leading stocks. He looks for a stock that is already strong, waits for it to form a clean pattern such as a cup with handle or a flag, and buys when it breaks out on heavy volume. He sells quickly when a breakout fails and takes profits when a stock gets overextended.
Who he is
Before he traded for a living, Zanger built swimming pools in Southern California. He taught himself to read charts, and during the late-1990s technology boom he is widely reported to have turned roughly $11,000 into more than $18 million in under two years, a run often described as a record for a personal account. Most of it came from a handful of fast-growing technology and communications leaders of the period.
He publishes The Zanger Report, a market newsletter built around his chart reading, and with Mark Minervini, David Ryan and Mark Ritchie II he co-wrote Momentum Masters, a roundtable on how each of them trades.
The patterns he trades
- Cup with handle. A rounded base followed by a small pullback near the top; the breakout is above the handle.
- Flags and pennants. A sharp rise (the pole) followed by a short, tight drift; the breakout continues the move.
- Triangles. A tightening range, ascending or symmetrical, that resolves with a break through the top line.
- Channels. A stock trending inside parallel lines, bought as it breaks above the upper one.
In every case he wants volume well above average on the breakout day, and he trades the market's fast-growing leaders rather than thin, little-known stocks.
How he reads volume
Zanger treats volume as the truth behind the pattern. A shape on a chart can form by accident; heavy buying is harder to fake.
- On the breakout: volume well above the stock's normal level. The bigger the surge, the more likely large buyers are behind it.
- Inside the pattern: volume that dries up as the range tightens, a sign that sellers have run out.
- After a long run: heavy volume on a down day, or heavy volume with no upward progress. Both suggest big holders are selling into the strength, and he treats them as warnings.
When he sells
A breakout is a bet that a move has started. Zanger sells as soon as the chart says the bet was wrong, and takes profits when the move gets ahead of itself.
- The breakout fails and the price falls back inside the pattern
- The stock breaks the trendline it has been riding
- Heavy selling appears after a long run, or heavy volume brings no progress
- The move turns steep and parabolic, well above its averages: sell into the strength
- The market itself turns down: cut exposure across the board
Leaders in a rising market
His biggest gains came from concentrating in a few of the strongest stocks in the strongest industries, the ones institutions were buying hardest. The same patterns in a laggard, or in a market that is falling, fail far more often, so he trades hardest when the market is trending up and steps back when it isn't.
Using his method here
- Breakouts today: US stocks clearing their 20-day high on heavy volume tonight.
- High tight flags: stocks that nearly doubled in about eight weeks and are now resting in a tight flag.
- Unusual volume: stocks trading far above their normal volume today.
- VCP screener: uptrending stocks whose ranges are tightening, the shape many of his patterns share.
- Market timing: whether the market is trending well enough to trade breakouts at all.
Questions people ask
Who is Dan Zanger?
An American stock trader known for trading chart-pattern breakouts in fast-growing leading stocks. His trading during the late-1990s technology boom made him widely known, and he publishes a market newsletter, The Zanger Report. He co-wrote Momentum Masters with Mark Minervini, David Ryan and Mark Ritchie II.
What chart patterns does Dan Zanger trade?
Mostly continuation patterns in stocks that are already leading: cups with handles, flags and pennants, ascending and symmetrical triangles, and channels. He buys as price breaks out of the pattern on volume well above normal.
How does Dan Zanger use volume?
Volume is his confirmation. A breakout on heavy volume shows big buyers behind it; one on light volume is easier to fake. He also watches for heavy volume on down days in a leader, an early sign that it may be topping.
How much money did Dan Zanger make?
He is widely reported to have turned roughly $11,000 into more than $18 million in under two years at the end of the 1990s, trading technology and communications leaders through the boom. The run is often described as a record for a personal account.
When does Dan Zanger sell a stock?
When a breakout fails and the price falls back into the pattern, when a stock breaks the trendline it has been riding, or when heavy selling appears after a long run. He takes profits into sharp, steep moves rather than waiting for them to reverse.