Pull Back Trading Strategy
The Pull Back Trading Strategy is for trading stocks that are extremely strong and trading on high relative volume.
When I see a stock that has extremely high volume I look to get in on the first or second pull back. Pull backs should take the form of a Breakout Chart Pattern such as Bull Flags or Flat Tops.
Stocks to consider:
Stocks that made a big move up (5+ green candles) then pulled back to the 9ema or VWAP
Ideal stocks will be running up on a catalyst, News, Earnings, etc.
MUST have at least 5-10 candles in a row on the up ramp or very big candles out of the gates (1-2)
MUST have pulled back to the 9ema and forming a flag pattern
How to find stocks:
Find these stocks by simply watching the top 5 relative volume leaders and/or biggest gainers, and waiting for the pull backs.
How to Buy (Summary, details for Trading Course Students)
- Buy the first 5min candle to make a new high
- Buy the first 1min candle to make a new high if you are confident, typically 1min is too choppy.
- Look to double up on the break to high of day. Also adjust stop to breakeven when you double up.
- Always stop down 20 cents for typical position sizes
- Setting stops at the low of the pull back is the proper place.
- Hold unless that stop is hit.
How to Sell
For stocks over 50.00 per share
- Adjust stop to breakeven when you double up on high of day break.
- Look to sell into the high of day squeeze. This may only be 10-20 cents for the shares doubled up, but a nice winner for original shares.
- Hold a ¼ position with stop at Break Even but move this stop up to the low of the last 5min candle.
- Using a 20 cent stop I’m risking not more than $200/trade. Max initial size of 1k.
- Use 400 shares – 1k as base position size, double if it’s strong to 1k-2k, triple to 4k if really good and stop is breakeven.