SD 50

Here my notes on the Stochastic dynamite off a rising 50MA created by CKBergin.

Money never sleeps. SD 50 is a pullback set up from an oversold condition. The  SD50 setup, i.e. stochastics dynamite off a rising 50 day ma after the 14/3 stochastics or CCI drops below 20 and -100 respectively.  

Here are the setup conditions.

1. Market is in a confirmed uptrend,
2. Strong IBD type stock 
3. 50 day ma is moving up, 
4. The 14/3 stochastic or 20 day CCI is below 20 and -100 respectively, 
5.  Price is at a support level either horizontal, gap, Fibonacci or 50 day MA level,  
6. The last price bar is either a higher close than the open (white candle) or a pause day(higher low than the low of the lowest low day in the pullback. and 
7. On the close the stochastic cross over above 20 or the CCI closes above -100. If all conditions are met place an order .05 cents above the high of the prior day with a stop loss .10 cents below the last swing low. 
8.  Look for a change of direction day, which is a close above the high of the lowest day high in the lowest bar of the pullback. 
9. Buy the close or the next day open without waiting for the stochastic to close above 20.
10. Position size should not exceed a risk of more than 1% of trading capital. 

Managing the Trade:

Initial target is 20% so you hold until that happens or your initial stop on close is hit. DO NOT MICROMANAGE THESE TRADES. Let the market take you out. Once 20% target price is hit you now stop out on any close below the low of the last high close bar, but sell any key reversal day. By doing this you can catch some 25% to 30% trades, and at worse your 20% intra day gain might only stop on close at 18%.

 If you get a take off like GPRO with only one day red bars that are ignored the next day ride the sucker and after 50% use a three point point and figure chart reversal the exit. These are the kind of home run trades that can make your year. 

Target

Shoot for 20% gain or you can take off 1/2 at 10% and trail the rest at a three day low stop. In any event sell all reversal days on volume. he high of the of the prior day being exceeded by .05 cents

EXAMPLES:

GPRO.  The low day was 8/8 with a high of 39.18. It traded sideways in a tight narrow range with the 14/3 stochastic going under 20. Although we had no 50 day MA yet the trend was rising as prices were higher than the IPO day. On 8/14 we had a higher close on better volume than the prior day at 38.49 a 3.8% gain and a dollar breakout.

8/14/14:

Observations: Volume increased, Dollar Break out w/3 move

CCI coming off oversold

8/15/14 Trade entered @39.50

RESULT

BABA?

1. Market in an uptrend: Check--but not exactly strong
2. IBD type of stock, Check
3. The 14/3 stochastic or 20 day CCI is below 20 and -100 respectively? CCI below 100
4. Support level, Check Bounced right at 50 MA.  
5. The last price bar is either a higher close than the open (white candle) or a pause day(higher low than the low of the lowest low day in the pullback?  Not fulfilled, High of low day was 107.95 , thus would need to clear above 108 and CCI above 100.

Conclusion: BABA is close to triggering an SD 50 trade but is not fulfilled yet.