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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Day Trading Setup

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Candles Chart
Small Patterns
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 01/22/2019
24,404 -301.87 -1.2%
9,822 -189.84 -1.9%
708 1.16 0.2%
7,020 -136.87 -1.9%
2,633 -37.81 -1.4%
Tom's Targets    Overview: 01/14/2019
24,800 or 22,800 by 02/01/2019
10,100 or 8,850 by 02/01/2019
740 or 680 by 02/01/2019
6,600 or 7,300 by 02/01/2019
2,740 or 2,565 by 02/01/2019

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

My book, Swing and Day TradingSwing and Day Trading: Evolution of a Trader book., is dedicated to swing and day trading, as the title suggests. If you are interested in swing or day trading, then consider buying a copy of the book.

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This page discusses a day trading setup for stocks.


Day Trading Setup

Here is what to look for.

  1. Select an actively traded stock with narrow bid/asked prices.
  2. Find a stock with a straight-line run in price, either up or down.
  3. Price begins to retrace the prior move.
  4. At the turn, the ticker tape for the stock may pause or slow considerably.
  5. Look for the 10-minute market trend (a line chart showing the Nasdaq/Dow/S&P or other index for the last 10 minutes) to be moving in the same direction as the stock. That means both should turn and head in the new direction. You don't want to fight the market trend where the stock goes down and the market up, or the reverse, stock up/market down. If the stock and market head in the same direction, then that is the entry signal, especially if the ticker starts moving again.
  6. Expect a reversal at 38% or 50% of the prior move.
  7. When price reaches the 38% level and the market reverses trend and the stock ticker tape slows or stalls, then close out the trade. If the market is still strong and so is the stock and ticker, hold on for the 50% retrace level.

You can place another shorter straight-line run trade when price reverses again, but doing this a third time risks a losing trade. In other words, the stock will be building a symmetrical triangle with converging tops and bottoms, so trading the swings becomes more risky because they are narrower. Do not swing trade consecutively more than twice unless the swings are excessively wide (and even that will be risky).

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Two Trade Examples

Key points in KLAC stock

Pictured is KLAC (KLA-Tencor Corp.) stock on August 22, 2007, one-minute scale from the opening bell. Price gapped open higher from the prior day and peaked at 59.90 (point A), the first price bar. Price tumbled and I spotted the stock at around 9:40. At point D, price made a green bar but rarely does a straight-line run down reverse after just one bar, so I waited.

At E, 58.85, I bought the stock and notes from the trade say that the Nasdaq had turned up (viewing the 10-minute trend) and the stock looked to be forming a base. The thinking is that after a strong downtrend, price will bounce. I wanted to trade that bounce.

How far would the bounce take price? The high at A was 59.90 and the low at B was 58.77, for a difference of $1.13. Using a Fibonacci retrace of 38%, that would mean a bounce up to 59.20. That became my target price.

Price moved up to C and then stalled, so I sold at F (59.22). Notice that price bounced to the first Fibonacci retrace level (59.20) of the AB move. Notes from the trade say that the Nasdaq was turning down, and I expected price to follow.

I sat and watched price drop to G. Using the BC move up, I calculated that the 50% Fibonacci retrace would bottom at 59.25 - ((59.25 - 58.74) x 50%) or about 59.00. The stock reached a low of 58.98. I bought at G (59.00) and rode it up. My notes from the trade said "I think this will turn here. Market (Nasdaq 10 minute trend) just shot up after I bought. This is at the 50% Fibonacci retrace of the prior move down.

I assumed that price would double top, or at least attempt to make a second top before tumbling. Failure to make a new high is called a 2B pattern. The 59.20 price seemed like a good target, so that is what I used. When price climbed to H and the "Ticker (a running list of trades as they occur) stalled near the price of the old high at C, and I thought we'd get to 59.20. It didn't so I'm out at 59.19." The stock dropped from there.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. People like you are the reason people like me need medication.