As the Cycle Of Price Action progresses off its lows, Oliver Kell uses the 10 and 20-day exponential moving averages to indicate the trend’s direction and momentum.
The EMA Crossback is the first time the price retests the moving averages after a Wedge Pop.
Eventually, the price will consolidate the quick pop off the lows and start moving sideways or slowly drift downward into the moving averages. Another ideal tradable range will be set up, providing a clear pivot and a defined area to control risk.
Once the Reversal Extension off the lows is confirmed by a Wedge Pop, the moving averages will align and guide the stock higher. The EMA Crossback is an optimal buy area to position early in the Cycle Of Price and will give traders the flexibility to allow the cycle to unfold.
First Consolidation After The Wedge Pop
When the Wedge Pop reclaims the moving averages, pay close attention to the stock as it responds to any selling pressure. Focus on the price levels it respects as it slowly digests the recent gains.
Remember, a pivot point is a critical price level on a stock chart in which the direction of a trend may continue or change. When the moving averages catch up to the strong price action through a Wedge Pop, The stock will begin to consolidate and set up another tradable pivot.
The EMA Crossback is the first consolidation into the rising moving averages.
Again, trading through a pivot can help guide us in two ways:
Putting It Together
Early in the Cycle Of Price, The EMA Crossback is an ideal entry point to minimize risk as the trend advances.
Symbol: DDOG
Company: Datadog
Year: 2021
Click on the chart above to make it bigger.
Entering a stock at the EMA Crossback allows you to hold positions longer as you let the moving averages guide the price higher.
The worst thing you can do is chase stocks as they erratically bounce off the lows. Wait for the first pullback into the moving averages.
Look for the price to show support, then buy with strength when other buyers appear.