{"id":8382,"date":"2021-04-21T13:32:22","date_gmt":"2021-04-21T17:32:22","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=8382"},"modified":"2023-01-24T12:08:27","modified_gmt":"2023-01-24T17:08:27","slug":"buy-50-day-ma","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/","title":{"rendered":"How to Find Low-Risk Entries in Top Stocks with the 50-day Moving Average"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/low-risk.jpeg\" alt=\"\" title=\"\"><\/figure>\n\n\n\n<p>Most of the leading stocks we trade in <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\"><em>The Wagner Daily<\/em>,<\/a> our nightly stock picking report, are breakouts from tight ranges near the 10 or 20-day moving averages. <\/p>\n\n\n\n<p>These top growth stock trades are also typically within 5% to 15% of their base highs, and usually trading near their 52-week highs.  <\/p>\n\n\n\n<p>When buying this type of trade setup, we look for the price to move higher right away, or within a few days of our entry.<\/p>\n\n\n\n<p>These types of explosive swing trades are primarily designed to work<em> when our <a href=\"https:\/\/new.morpheustrading.com\/blog\/market-timing-system\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/new.morpheustrading.com\/blog\/market-timing-system\/\">market timing model<\/a> is on a &#8220;buy&#8221; signal and overall market conditions are strong. <\/em><\/p>\n\n\n\n<p>However, when market conditions are <em>not<\/em> ideal and the major indices are recovering from an intermediate-term selloff, many leading stocks will have corrected 15% to 25% or more (off their highs) and not in a position to break out to new highs.<\/p>\n\n\n\n<p>In this type of market (which we are experiencing now), we instead focus on lower-risk <a href=\"https:\/\/youtu.be\/XcPkibMMIwg\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/youtu.be\/XcPkibMMIwg\">starter positions<\/a> in stocks moving back above their 50-day moving averages (and only <em>after<\/em> the major indices stop setting lower lows).<\/p>\n\n\n\n<p>In particular, we scan for quality, leadership-type stocks that are in a position to reclaim their 50-day moving averages after several weeks of choppy price action.<\/p>\n\n\n\n<p><em>Continue reading<\/em> for a clear example of how to profit from lower-risk trade entries when market conditions are less than ideal. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/#Etsy_ETSY\" >Etsy ($ETSY)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/#3-step_checklist_for_low-risk_buy_entries_at_the_50-day_moving_average\" >3-step checklist for low-risk buy entries at the 50-day moving average<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/#Stop_placement\" >Stop placement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/#A_losing_trade_done_right\" >A losing trade done right<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/buy-50-day-ma\/#Stealth_buy_entry\" >Stealth buy entry<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Etsy_ETSY\"><\/span>Etsy ($ETSY)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Prior to the Nasdaq&#8217;s recent correction, e-commerce company  Etsy ($ETSY) was a leading stock that scored massive gains for our <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\">newsletter<\/a> subscribers.<\/p>\n\n\n\n<p>Like most top growth stocks, $ETSY has since cooled off and entered into correction mode.<\/p>\n\n\n\n<p>Now, $ETSY has become an excellent example of the type of low-risk entry point we look for when buying a quality stock that reclaims its 50-day moving average.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3-step_checklist_for_low-risk_buy_entries_at_the_50-day_moving_average\"><\/span>3-step checklist for low-risk buy entries at the 50-day moving average<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>50-day MA crossover &#8211; <\/strong>Whether the chart pattern is more of a sideways consolidation (like $ETSY) or more of a <a href=\"https:\/\/school.stockcharts.com\/doku.php?id=chart_analysis:chart_patterns:cup_with_handle_continuation\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/school.stockcharts.com\/doku.php?id=chart_analysis:chart_patterns:cup_with_handle_continuation\">cup with handle pattern<\/a>, we look for an entry after the price crosses back above its 50-day MA <em>on increasing volume<\/em>. <br \/><\/li>\n\n\n\n<li><strong>Higher lows &#8211; <\/strong>Prior to the entry, we first need to ensure that &#8220;higher lows&#8221; are already in place. This helps confirm the stock is already forming a bottom. If the stock has been correcting through sideways price action (rather than a pullback), we then look for the price swings to tighten up. In the case of $ETSY, volatility contracted right before the price reclaimed the 50-day MA.  <br \/><\/li>\n\n\n\n<li><strong>Volume confirmation &#8211; <\/strong>The actual rally through the 50-day MA is the &#8220;buy&#8221; signal, but the move should be accompanied by volume that is either <em>greater than the prior session OR higher than its 50-day volume moving average.<\/em><\/li>\n<\/ol>\n\n\n\n<p>The daily chart of $ETSY shows how the stock met our 3-step checklist criteria before we recently bought it:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/210421ETSY1.png\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/210421ETSY1.png\" alt=\"\" width=\"818\" height=\"657\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to view full-size image<\/em><\/figcaption><\/figure>\n\n\n\n<p>On April 8, we bought $ETSY as a starter position in the model portfolio of our <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\">nightly stock trading report<\/a> when the price reclaimed its 50-day MA (just before 12 noon).  <\/p>\n\n\n\n<p>If buying the stock on the same day it moves above its 50-day moving average, higher volume should confirm by the close. <\/p>\n\n\n\n<p>Some stock charting platforms, such as <a href=\"https:\/\/www.tc2000.com\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/www.tc2000.com\/\">TC2000<\/a>, have a helpful <em>relative volume<\/em> indicator that displays volume as a percentage above\/below average for that specific time of day.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stop_placement\"><\/span>Stop placement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Protective stops on these types of buy entries can be neatly placed just below the low of the day that reclaims the 50-day moving average.<\/p>\n\n\n\n<p>After a leading stock pops back above its 50-day MA, we don&#8217;t want to stick around if the price drops back below that day&#8217;s low&#8211;<em>especially<\/em> when the candlestick has a wide-ranged body that closes near the highs of the session.  <\/p>\n\n\n\n<p>With this method, the stop can typically be placed anywhere from 4% to 6% below the entry, which is usually ideal.<\/p>\n\n\n\n<p>The $ETSY chart below shows how we initially placed our stop below the 50-day MA, then moved it higher when the rally attempt started to falter:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/210421ETSY2.png\"><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2021\/210421ETSY2.png\" alt=\"\" title=\"\"><\/a><figcaption class=\"wp-element-caption\"><em>Press chart to view full-size image<\/em><\/figcaption><\/figure>\n\n\n\n<p>As annotated on the chart above, $ETSY struggled to follow through after our entry, then pulled back for a few days before bouncing off the 50-day MA with a bullish reversal candlestick.<\/p>\n\n\n\n<p><em>If the stock was acting right, then it should have held the low of the reversal candle&#8211;but it did not.<\/em><\/p>\n\n\n\n<p>The price of $ETSY opened lower the very next day, then closed below the low of the reversal candlestick <em>and<\/em> its 50-day moving average.<\/p>\n\n\n\n<p>Because of the bearish price action, we alerted <em><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\">Wagner Daily<\/a><\/em> members that we were raising the stop from the original price (just below $200) to the $209.89 level (below the prior day&#8217;s low, plus a bit of wiggle room).<\/p>\n\n\n\n<p>Our protective stop triggered on April 20, knocking us out of the trade with a small -2.5% loss on a <em>half-sized<\/em> starter position. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_losing_trade_done_right\"><\/span>A losing trade done right<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Particularly if you&#8217;re new to trading, the $ETSY trade may seem negative because we stopped out.<\/p>\n\n\n\n<p>However, we were able to test the waters on the long side for several days, before exiting with minimal risk due to a tight stop with only partial share size.<\/p>\n\n\n\n<p>In the present market environment, this is actually the type of trade we will <em>always<\/em> take if possible.  <\/p>\n\n\n\n<p>Losing trades are part of the business, but <em>properly managing losing trades<\/em> is the key to protecting the bulk of your hard-earned profits from more bullish market conditions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stealth_buy_entry\"><\/span>Stealth buy entry<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Unlike buying a stock that breaks above resistance of an obvious swing high, this type of buy entry through the 50-day moving average entry does <em>not<\/em> draw much attention.<\/p>\n\n\n\n<p>As such, these types of 50-day MA trade entries typically have some time to work before the stock hits its next resistance level.<\/p>\n\n\n\n<p>When top growth stocks start leading the market again, we will be ready to score huge gains from explosive breakouts to new highs.<\/p>\n\n\n\n<p>But in the meantime, we will focusing on gains from low-risk buy entries such as the 50-day MA setup detailed here.<\/p>\n\n\n\n<p><em><strong><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\">Start your Wagner Daily subscription now<\/a><\/strong> to be instantly alerted to the next explosive stock pick, while learning a proven trading strategy since 2002.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most of the leading stocks we trade in The Wagner Daily, our nightly stock picking report, are breakouts from tight ranges near the 10 or 20-day moving averages. These top growth stock trades are also typically within 5% to 15% of their base highs, and usually trading near their 52-week highs. When buying this type [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-8382","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=8382"}],"version-history":[{"count":9,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8382\/revisions"}],"predecessor-version":[{"id":15704,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8382\/revisions\/15704"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=8382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=8382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=8382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}