Important Stocks To Watch - Stocks At Or Near 50 MA, 200 MA, Chart Patterns

The Double Bottoming Tails Trading Strategy

This is a trading strategy that can often give the trader a good risk to reward ratio. It can also have a high winning rate.

For those who do not know what a bottoming tail is, you can refer to the article bottoming tail.

A bottoming tail is a bullish reversal signal. So when that happens we want to buy the stock if it trades above the bottoming tail.

But with a double bottoming tail, we wait for the presence of two bottoming tails.

Criteria:

  1. Wait for the presence of 2 bottoming tails
  2. Buy the stock when trade above the highs of the 2 bottoming tail
  3. Put a stop loss at the lows of the bottoming tails.

In the chart above, we can see how AJG forms two bottoming tail at the rising 20 MA. It resulted in a rapid run up.

Managing The Trade

Once you are in a profitable territory you should raise your stop loss to breakeven when you reach a 1:1 profit loss ratio. This means that if you risk $100 for the trade and are now making $100, you should raise your stop loss to breakeven.

Take 1/3 to 1/2 of the profits off the table when you reach a 1:1 profit loss ratio.

Ride the other 1/3 or 1/2 half up.

Increasing The Accuracy

The setup works better if you see the double bottoming tail happening at significant technical areas such as the 20 MA, 50 MA or 200 MA or when your technical indicators flashes a buy signal.

If you are more resourceful you can also take a look at lower timeframes to find confirmation.

For example, the chart above shows the 60 min chart of AJG. Here we can see that it broke above a 60 min downtrend line. It also formed a double bottom and was finding support at the 60 min 200 MA. The stochastics was also oversold at the moment.

  • Help support this page and press the Facebook Like button below. Thanks!

Join Dstockmarket's Facebook Page 

Recent Articles

  1. October 2021 Stock Market Analysis

    Oct 20, 21 11:48 AM

    Are the markets in an uptrend or downtrend? Where are the support and resistance areas? Stock market analysis for October 2021.

    Read More

  2. AMD Stock, From $85 To $122 In 12 Trading Days

    Oct 19, 21 08:25 PM

    A combination of technical setups help to propel AMD higher. When it hit the 200 MA, it bounce up and shot up to $122.

    Read More

  3. AA Stock, From $38 To $57 In Less Than 2 Months

    Oct 19, 21 01:01 AM

    After correcting to the 50 day moving average, Alcoa was able to find support and rise to $57 in less than two months.

    Read More

  4. Visa Stock, V - Technical Analysis Of Visa

    Oct 18, 21 12:24 AM

    Technical analysis of Visa stock. A look at its trends and support and resistance.

    Read More

  5. Technical Analysis Of Bitcoin

    Oct 17, 21 10:38 PM

    Analysis of Bitcoin's chart. Is it in an uptrend or downtrend and where is the support and resistance.

    Read More

New! Comments

Have your say about what you just read! Leave me a comment in the box below.