Guide to Day Trading Strategies

Á
 ag pattern was formed.
Moving Average Retracements
At a certain point after a stock has made a quick move up, and pulls back more than three to 
À
ve candles, it is no longer a bull 
Á
ag. A bull 
Á
ag requires a very distinctive move to the upside, 
and a short period of pullback before making another move up. When a stock pulls back and 

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consolidates during the pullback, it is neither a bull 
Á
ag nor a 
Á
at top breakout pattern. It is 
simply a 
Á
ag pattern. Whenever I look at 
Á
ag patterns, I like to see the stock consolidating above 
the support of the 9 EMA or possibly the 20 EMA. Moving average retracements will almost 
always be based on the 
À
ve minute chart, since they are slower moving setups that require more 
traders to take notice. We only trade one minute setups on fast moving breakouts. The reason 
I like the moving average retracements is because when prices hold above the 9 EMA, it is a 
good indicator of strength in the trend. When a stock has pulled back beyond a typical bull 
Á
ag, 
I usually wait for the price to actually touch the 9 EMA before taking my position. In the case 
where a stock has pulled back and broken the bull 
Á
ag formation, we can no longer buy the 
À
rst candle to make a new high. Instead we have to wait for the moving average consolidation. 
Many times, strong stocks will ride the 9 EMA for a period of several hours. Any pullback to the 
9 EMA offers a low risk entry opportunity for these types of trending stocks.
During a 9 EMA pullback, I will buy once the price has touched the 9 EMA and set my stop at the 
low of the pullback or just below the moving average. I typically like to see the price has touched 
the 9 EMA, and is beginning to curl up slightly before taking my position. This shows me that 
traders are respecting the moving average as a support level. Remember, the difference between 
the bull 
Á
ag and the 9 EMA pullback is that the 9 EMA pullback typically takes much longer to 
develop. When I am holding a position from a 9 EMA pullback setup, I will sell half through the 
high of day spike and adjust my stop to breakeven. I will hold the remaining position until I see 
an exit indicator.
Many conservative traders will use a strategy of only entering trades near moving average 
support. Entering near moving average support provides the lowest risk entry for trend based 
trades. Additionally, many of these traders will hold positions until a moving average is broken 
by the price action. In the stock chart of MRTX, you can plainly see that if you entered on the 
À
rst moving average pullback after momentum picked up at 11:20am, you would have been 
in at about $37.00. You could have held this position until about 3:30pm, when the price broke 
below the 9 EMA at $41.00. This is a favorable strategy since these types of trades can provide 
an opportunity to participate in the market without having to take part in high speed trading. 
Slower moving trend based trades are generally suitable for smaller share size because the risk 
of exposure time is increased.
We can also trade moving average retracements to the short side for weak stocks. The rules of 
shorting weak stocks on the 9 EMA pop is the same as the 9 EMA pullback trade. Moving average 
entries provide short opportunities that I 
À
nd much safer than a traditional bear 
Á
ag, because 
they are slower moving and less volatile. The moving average support gives me con
À
dence in 
the trend whether it is to the long side or the short side.

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