STE: A Master Trader Climactic Buy Setup is when a stock falls rapidly away from the 20-MA and reverses. It shows extreme fear (obviously on negative news) with the reversal signaling the short-term end of the bearish momentum fall. You can clearly see how STE is extended using any objective means of measurement (percent move in a short time, distance from 20-MA, etc.). A Volume spike after a reversal bar(s) is often a great indicator of the last of the bulls to throw in the towel and sell. Obviously, the reversal happening on support improves the odds of the reversal holding. Here, the reversal occurred on Major Support (dotted green line) where STE broke out from last December igniting a huge bullish move. STE didn’t have what we call a potent reversal (e.g., -Gap reversal or +WRB); instead, it occurred by consolidating for five days with some Bottoming Tails (BTs). Our entry was over the high of that consolidation. After entering, it exploded higher (whether from short covering or new buyers like us), allowing us to book a quick gain.
ACLS: Trading Breakouts and Breakdowns are great Setups in quality trends. ACLS was in a quality downtrend. Master Trader objectively defines a downtrend by two or more lower Pivot Highs (PH) and lower Pivot Lows (PL). We also look for controlled selling, below the declining 20- and 50-MA, and bearish price action which includes (a) shallow retracements; (b) bullish bars being ignored; (c) controlled, systematic selling with declining and parallel 20- and 50-MAs; and (d) showing relative weakness to the sector and broader markets. The downtrend started in February after the bearish gap down and shallow retracement under the 20/50-MA. At the first blue arrow, ACLS closed with a bearish Wide Range Bar (-WRB0 Breakdown candlestick where we started monitoring it for a bearish setup. It then consolidated in a bearish manner for two weeks below the 20-MA, unable to trade above the –WRB, with bullish bars ignored, in a downtrend. At the second blue arrow, we shorted the stock, booking a generous gain in an easy-to-manage seven-day swing trade.
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