Pullback Entry Method

Pullback entry is the bread and butter for entering a swing trade. We wait for pullback because we know no stock will go straight up without undergoing correction - even for strongly trending stocks.
The question is how can we tell when the correction is likely to come to an end and the uptrend is set to resume? The answer is when the pullback has reached a support level, which could be a price support line, trendline, moving average line, gap support or Fibonacci retracement level.

The more support level coincided with each other the stronger the support level and the more likely that a rebound will take place there.

Next we wait for a bullish reversal candle, e.g. Doji, hammer, engulfing bull, piercing line, bullish harami etc. to appear as a potential swing low bar and make the pullback entry on takeout of the high of the bullish reversal candle.
We will look at SIME DARBY BHD charts to illustrate the pullback entry method.

SIME DARBY BHD Weekly Chart

Weekly chart showed SIME had been in a downtrend since mid Jan 08. Positive divergence appeared between price and MACD from Sep 08 to Dec 08 suggesting a potential trend change. SIME started to make a potential higher low in early Mar 09. 3 weeks later SIME 20-week SMA line started to turn up suggesting the start of a new uptrend. Once the mid Feb 09 peak was taken out in Apr 09 SIME has been in an uptrend.

SIME DARBY BHD Daily Chart

We switched to the daily chart to identify our pull back entry point. Notice that SIME pulled back to the rising 20-day SMA line 4 times creating swing trade pullback entry opportunities since SIME weekly trend changed to up. The Pullback entry were to be made when the high of the potential swing low bars were taken out.

Disclaimer:Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and information presented in this blog.