This trading strategy takes advantage of an orderly correction to the rising 20 day moving average. The keyword here is "orderly" correction. If the correction was messy then it cannot be a setup.
With an orderly correction, you can easily draw a downtrend line to connect the highs of the correction.
In order to find a setup we need to find a stock that is in an uptrend.
In the chart above we can see how KEYS was in an uptrend. The stock corrected orderly to the rising 20 MA and then it broke out higher. A trader could buy the breakout above the downtrend line and put a stop loss below the low of the correction.
If you go down to the 60 min chart, you can usually draw a better down trend line.
The 60 min chart will help you to spot the break of the downtrend line better.
It takes some practice to draw a correct trend line. But with time, you can draw a nice one.
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