Though it may sound counterintuitive, I find it best to throw all indicators out the window completely on possible trend days. Why? The stochastic or RSI or other oscillators will stay overbought all day (flashing a constant sell signal) and even in the case of the 3/10 Oscillator, it will flash a false divergence. Remember in my book divergences are good only to forecast retracements to the 20 period EMA, though they can precede reversals. Generally, divergences are a yellow light only and need to be confirmed by price action breaking an average or support before an opposing signal is taken.

The moment I suspect we have a trend day, I put on a small core position that I intend to hold until the close. However, I’m “scalping” any pullback, meaning – on buy days – I’m buying every single pullback to the 20 EMA and 50 EMA with a stop beneath the 50 EMA. I’ll scalp out of the trade – usually done on leverage – just above the prior swing high or if we’re forming bearish candles or hitting some sort of higher time frame resistance. I’m looking to scalp the swing (impulse) aggressively and be out soon… while holding onto a small core position.

I make the most money in my accounts on trend days, though they may occur two or three times per month. Also, if I’m wrong about a trend day, I tend to lose a small amount on the day relative to how much I gain if it was a trend day (thanks to the core position and two or three ’scalp’ trades).

Today was indeed an official “Trend Day” and – although we came very close to getting the two-bar close beneath the 50EMA, we did not, and the trend day was inches from being reversed, but it was only a fake-out and price surged off the 50 to close the day on the highs in true trend day fashion. This was a wonderful example of how strong stomachs prevail.

If we suspect a trend day is upon us, then every pullback would be a buy. Breaking the 20 is a warning sign but not enough evidence that the trend day has ended or was invalidated. We would need two definitive closing bars beneath the 50 EMA to invalidate a trend day.

Generally when I suspect a trend-day, I put on a core position and then utilize a trailing stop beneath the 50 EMA and buy every pullback. I continue this until price breaks the 50. It’s a monetary edge, rather than an accuracy edge, meaning if 5 suspected trend days work as planned and 5 fail, you’ll make much more on the 5 that ‘work’ than the 5 that don’t.

All bets are off if two bars close beneath the 50 EMA currently around $85.60.

I do not use StockCharts live – I use TradeStation as my vendor/broker/software but I don’t like the way those charts display on my blog. They’re not as clear example-wise as StockCharts is. Plus, SC is more the ’standard’ that most people are used to and can use for free so it’s easier for readers to follow along and create the same charts.

I keep the colors consistent on all charts on all software platforms I use:

20 EMA is green
50 EMA is blue
200 SMA is red

I’d have the 50 be yellow if I could (like a traffic light) but it would never show up on charts.