Adam & Eve Tops
Anticipating  A Selloff
Andrews Pitch Fork
Bilateral Trade Setups
Bollinger Bands
Breakout Trading
Comp. Relative Strength
Cup With Handle
Cutting Loses
Daily Range
Exit Strategies
Exploring Market Physics
Dow and Elliot Waves
False Breakouts and Whipsaws
Flags and Pennants
5 Fibonacci Tricks
Finding Stocks
Fun With Fibonacci
Greed and Fear
Low Down On Bottoms
Market Timing
Head and Shoulders
Hell's Triangle
Momentum Cycles
Momentum Trading
Morning Gap Strategies
Moving Average Crossovers
Pattern Failure
Pitfalls Of Selling Short
Playing Failed Patterns
Point and Figure
Pull Back Day Trading
Selling Declines
Scanning Tips
Stage Analysis
Surviving Bear Markets
The Big W
Tale Of The Tape
Tape Reading
Time Trading
The Gap Primer
Trailing Stops
Trading Execution Zone
Triangle Trading
Trend Waves
Trend Direction and Timing
The Profitable Trader
Uncharted Territory
Williams %R
Wedges and Volume
20 Golden Rules
20 Rules For Trade Execution
20 Rules To Stop Losing Money
5 Wave Decline
3-D Trade Execution
Voodoo Trading






Pullback Day Trading


A stock you follow takes off and trends sharply. But you miss your entry and watch in frustration as it clears one hurdle after another. Finally it stops and reverses. As it pulls back on your 5-min chart and Level II screen, you have to decide whether or not to join the action.  Predicting price movement when an intraday trend pulls back requires both skill and patience. Some corrections persist or roll over into ranges that empty trading accounts. But others quickly bounce and take off to new highs. How can you tell which outcome is more likely?
The first pullback from a breakout has high odds of rapidly ejecting in the direction of the new trend. But watch the depth of the correction. If it breaks through several minor support levels before reversing, sellers will likely emerge when price tests the short term high. This common scenario will still produce good trades. With enough reward between your entry and the short-term high, you can place a sell order 1/16th or 1/8th below the top and ride the bounce into a quick fill. Use a 6-Out rule to measure trend pullbacks. Start your count with the first bar lower than the parabolic extension of the trend. Watch for a pullback at the same angle as the trend itself or in a tight sideways pattern. The next trend leg should begin no later than the 6th congestion bar.
Why does this work? Many day traders set their short-term chart indicators to periods that measure 5 to 8 price bars. 6 bar corrections will often reflect short-term support at these common settings. If price does not eject, the next bar can signal a trend change and trigger waves of reflex selling by this fast-finger crowd.

Keep in mind that markets often move in 1-2-3 patterns. Countertrends follow a natural tendency to pullback, bounce and then pullback again before finding support. Traders often fool themselves by jumping on the first bounce rather than waiting for the corrective move to unwind. The deeper a stock corrects, the less likely it will take out the old trend high and break into another wave. For this reason, only tight and small 1-2-3 patterns signal new trend movement.

Use a short-term oscillator, such as Stochastics, to measure an intraday rally's duration. After each price thrust, odds decrease that the trend will continue. Oscillators measure the depth of this overbought condition and provide early warning when a pullback lasts too long. Set these indicators to watch the same signals that other traders use to make their decisions. Then plan your trades to step in front of their reactions.


Pullback Support: Moving averages and Bollinger Bands measure how far price should pull back before reversing in the direction of the trend. Notice how this NXTL intraday trend repeatedly bounces at the 8 bar MA. Trends tend to find support at similar levels on each correction. Use Moving Average Rainbows to identify the right settings for each unique pattern.