{"id":7777,"date":"2010-10-20T10:57:16","date_gmt":"2010-10-20T14:57:16","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=7777"},"modified":"2023-08-01T19:39:56","modified_gmt":"2023-08-01T23:39:56","slug":"traders-ask-pullback-or-reversal","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal","title":{"rendered":"Traders Ask: Pullback or Reversal?"},"content":{"rendered":"<p>Hi Mike<\/p>\n<p>A common mantra repeated in most trading books is &#8220;follow the trend&#8221; and the process for doing so buy\/sell through dips. Sounds easy however there are multiple complexities rarely discussed such as:<\/p>\n<p>&nbsp;<\/p>\n<div>\n<p>&#8211; Few stocks continue in a nice straight line<br \/>\n&#8211; The stock you&#8217;re watching is in a great bull trend, but the market is weakening or turning<br \/>\n&#8211; Recent market activity has been very volatile and \u00a0stocks that were moving in a line now have a great big dip<br \/>\n&#8211; The major trend line has broken but the move has resumed at a different angle etc.<\/p>\n<p>Do you have guidelines you provide your traders to try to help identify a trend and differentiate a pullback vs. reversal? What is it about a reversal that defines the move as a new trend as opposed to a pullback or deep pullback? When doing this for a stock, how much emphasis do you put on the market doing the same?<\/p>\n<p>At present I&#8217;m making discretionary decisions and would like to put a system in place to get more mechanical in making the definition if possible. Any assistance you could provide would be much appreciated. Thanks :-).<\/p>\n<p><strong>Bella Responds<\/strong><\/p>\n<p>You are so on to the proper path to figuring this out. I love your work of identifying the nuances for these pullbacks. I love you trying to make your decision making more mechanical or logical for these set ups. Great work organizing your thoughts and reaching out for help so you can grow as a trader.<\/p>\n<p>There is absolutely no way I can offer you a definitive way to trade pullbacks in this blog. The market is too nuanced for that. But if you continue the thinking that you are doing in this question above you will find the pullbacks trades that make the most sense to you.<\/p>\n<p>A few thoughts from me:<\/p>\n<p>1) I draw trendlines mechanically and then use my judgment. I am not a slave to whether the stock technically has broken this thin line that I drew. I look at the more important levels from the move. Where did the stock break out from? \u00a0When it did where did it pause? I am more focused on whether a stock is above or below important levels to me than just the trend line.<\/p>\n<p>2) I know my pullback trades that work best for me:<\/p>\n<p>a) shallow pullbacks<\/p>\n<p>b) pullbacks to areas where the stock broke out from<\/p>\n<p>c) pullbacks to the trendline with strength on the tape<\/p>\n<p>d) pullbacks to the trendline or important level with the market gaining strength<\/p>\n<p>e) I pass on pullbacks that I am not confident about (perhaps like now the market is really selling off)<\/p>\n<p>Ok I will stop here as again I can not offer an exhaustive list of my best pullback trades and their nuances in one post. \u00a0But I do have a list. \u00a0And I do adjust my pullback trades for the many <a href=\"http:\/\/bit.ly\/8XOWQK\">affecting elements<\/a> that you are starting to think through. \u00a0This is the spot on process that you must go through as a trader.<\/p>\n<div>\n<p>You can be better tomorrow than you are today!<\/p>\n<p>Mike Bellafiore<\/p>\n<p><em><a href=\"http:\/\/www.amazon.com\/One-Good-Trade-Competitive-Proprietary\/dp\/0470529407\/ref=sr_1_1?s=books&amp;ie=UTF8&amp;qid=1375715301&amp;sr=1-1&amp;keywords=one+good+trade\">One Good Trade<br \/>\n<\/a><\/em><a href=\"http:\/\/http\/\/www.amazon.com\/PlayBook-Inside-Think-Professional-Trader\/dp\/0132937646\/ref=sr_1_2?s=books&amp;ie=UTF8&amp;qid=1375715301&amp;sr=1-2&amp;keywords=one+good+trade\"><em>The PlayBook<\/em><\/a><\/p>\n<p><a href=\"http:\/\/twitter.com\/mikebellafiore\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" src=\"http:\/\/twitter-badges.s3.amazonaws.com\/follow_me-c.png\" alt=\"\" \/><\/a><\/p>\n<\/div>\n<p>No relevant positions<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Hi Mike A common mantra repeated in most trading books is &#8220;follow the trend&#8221; and the process for doing so buy\/sell through dips. Sounds easy however there are multiple complexities rarely discussed such as: &nbsp; &#8211; Few stocks continue in a nice straight line &#8211; The stock you&#8217;re watching is in a great bull trend, but the market is weakening &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,908],"tags":[4674,1397,18,1193,653,1354,1437],"class_list":["post-7777","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","category-traders-ask","tag-one-good-trade","tag-pullbacks","tag-smb-capital","tag-trader-education","tag-trader-training","tag-trading-coach","tag-trendlines","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Traders Ask: Pullback or Reversal? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Traders Ask: Pullback or Reversal? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hi Mike A common mantra repeated in most trading books is &#8220;follow the trend&#8221; and the process for doing so buy\/sell through dips. Sounds easy however there are multiple complexities rarely discussed such as: &nbsp; &#8211; Few stocks continue in a nice straight line &#8211; The stock you&#8217;re watching is in a great bull trend, but the market is weakening ... Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2010-10-20T14:57:16+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-01T23:39:56+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/twitter-badges.s3.amazonaws.com\/follow_me-c.png\" \/>\n<meta name=\"author\" content=\"Bella\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Bella\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\"},\"author\":{\"name\":\"Bella\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/80500a901d0e5ce0a27fa996bb1b9161\"},\"headline\":\"Traders Ask: Pullback or Reversal?\",\"datePublished\":\"2010-10-20T14:57:16+00:00\",\"dateModified\":\"2023-08-01T23:39:56+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\"},\"wordCount\":543,\"commentCount\":11,\"publisher\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal#primaryimage\"},\"thumbnailUrl\":\"http:\/\/twitter-badges.s3.amazonaws.com\/follow_me-c.png\",\"keywords\":[\"One Good Trade\",\"pullbacks\",\"smb capital\",\"trader education\",\"trader training\",\"trading coach\",\"trendlines\"],\"articleSection\":[\"Mike Bellafiore's (Bella's) Blogs\",\"Traders Ask\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-pullback-or-reversal\",\"name\":\"Traders Ask: Pullback or Reversal? 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