Spotting and Strategies in Bottoming Patterns
Stocks and ETFs move in three trends: up, down, or sideways. But the real magic happens in the transitional phases—where fortunes are made by those who can read the signals. Many traders make the mistake of trying to “pick the bottom” without understanding the difference between a true bottoming pattern and a bearish trap.
Most bottom-picking attempts fail. Why? Because traders lack the knowledge to distinguish a quality setup from a false signal. At Master Trader, we give you the MTS criteria to pinpoint when a stock is truly reversing, so you can trade with confidence.
Real Profits. Real Trades. Real Success.
Take a look at the daily and weekly chart of TSLA, a perfect example of a bottoming pattern offering numerous stock and option trades.
Beautiful Bottoming Pattern on Multiple Time Frames
We recommended buying the stock where market with the red star. There were many other trading opportunities in this trading range, and we are giving new trade ideas over the high of the recent consolidation shown.
Master Your Skills with Trade Analysis
In this week’s Trade Review, instead of doing our typical analysis, we thought it would be a great exercise to let you do the analysis first – for trade seasoning!
Please review the following charts and answer the questions asked.
Let's Do Some Trade Review!
Okay, let’s begin!
- At “A,” what is a “Wide Range Ending Bar” and what does it suggest, particularly in this pattern?
- What happened during the following nine trading days trading within the range of this “Wide Range Ending Bar?”
- At “B,” what does the bullish close suggest and what trade strategies are you thinking?
- At “C,” it closed with a bearish topping tail (TT) at resistance and the 200-MA. What does the close suggest and what trade strategies are you thinking?
- At “D,” it gapped down and closed with a bullish engulfing +WRB. What does the close suggest and what trade strategies are you thinking?
- At “E,” it opened relative flat and closed with a huge +WRB engulfing bar. What does the close suggest and what trade strategies are you thinking?
- At “F,” why is this now marked Major Support (MS) in a sideways trend?
- At “G,” why is this called a +180 bullish reversal? What happened during the following 10 trading days trading within the range of this +WRB and what’s your bias then?
- At “H,” why did we recommend to subscribers to buy the stock and why did we recommend legging into a covered call the following day? Here’s the trade history: “4/25: TSLA - Bought the stock at $263.67. Anticipated Breakout of a bottoming pattern at the 20-MA, bullish retest weekly. 4/25: Sold 1/3 at $285.79 for $20+ gain in one day. Sold May (5/2) $305 calls for $4.40/share to leg into covered call and lower basis to $259.27. 4/28: Move Stop $278.78.”
- At “I,” there was a five-day bullish consolidation in the top half of a +WRB Breakout. What does the close suggest and what trade strategies are you thinking?
- At “J,” what do the moving averages that we use on daily charts (20, 50, and 200-MA) suggest about a potential bottoming pattern? Is TSLA a compelling Bottoming Pattern? Why?
- What is the pattern of the weekly chart of TSLA and does that support the current bullish pattern if it breaks through resistance?
- At “K,” what are you thinking when the Climactic Buy Setup and reversal at the 200-MA failed? What does the close suggest and what trade strategies are you thinking?
In Part 2 next week, we will provide you with our analysis!
Money Management for Trading and Investing
Proper money management for investing and Trading starts with position-sizing based on the amount of money you are willing to risk on a signal trade.
