I am seeing a lot of traders who wanna incorporate this popular trade but i am seeing a lot of people who are not understanding the pattern the way I trade it. When i trade the Holy Grail(HG) pattern, it is NOT enough for a stock to just 'touch' the 20 SMA(Simple Moving Average). I need to see more confirmation for me to spot a potential winner.
1. I recommend you scan for stocks are on top for the either Dollar Advancers or Percentage Gainers lists. Track the stocks that are up at least $2 or 5% on the day for example. Then watch a handful of those stocks that meet this criteria ALL DAY and watch as the stocks rally closely. The way they rally is speaks volume about the stock. Avoid parabolic moves, avoid 'spikey stocks'. You wanna see a nice steady rally on nice volume.
2. Now, just watch how they pull back to test the 20SMA. A pullback and touch of the rising 20sma is NOT enough. Don't be in a rush to buy the first touch. Just wait and relax because the trade isn't done setting up yet. What you wanna see on the pullback a nice, smooth, shallow and controlled retrace to the test 'around' the 20 SMA(doesn't have to be exactly on the 20SMA, Don't be so anal about it). But more important then the 'test' of the 20 SMA, YOU WANNA BE ABLE TO SPOT A PATTERN. I love to spot WEDGES(like i said in my trader interview last week). Being able to spot a wedge, flag, or triangle is even MORE IMPOTANT than the actual test of the 20SMA. This is what a lot of traders are missing in this setup.
So please train your eyes to spot patterns and picture the pattern in your mind or draw it. Just be able to spot the patterns and couple that with a test of the 20 SMA and you have increased your potential of detecting a winning trade. The trade fails once the pattern is broken, NOT when the the stocks drops below the 20 SMA necassarily.
Vice Versa for shorting.
Trade Smart!
Peace.
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