Trade Opportunity Case Study of the Week: VST 10ema Key Moving Average Pull Back – | Jan 12, 2025

The Trade Opportunity

The purpose of this weekly article is to analyze the top trading opportunity of the week. To improve our identification and execution of high quality trade ideas that meet our setup requirements.

Each article will focus on a stock that meets one of three of the main categories of setups I trade:

• Range Breakout / VCP / tight area breakout
• Pullback to Support/ Key moving average
• Gapper / Post Gap Setup

These articles are like taking a step into the batting cage and loading up a historical at bat from a Ace pitcher in the world series – they will help you prepare and execute in future situations by studying important moments from the past.

The setups we cover will appear again and again in each market cycle

So far we have covered examples of trade setups & entry tactics after a recent gap:
Previous article covering the BE Day 1 Gapper Setup
Previous article covering the AI Day 3 Gapper Setup
Previous article covering the DOCS Post Gap Range Breakout Setup
Previous article covering the ALAB Range Breakout Setup
Previous article covering the NVCR Range Breakout Setup
Previous Article on QMCO Range Breakouts
Previous Article on CRNC Episodic Pivot

With the market very choppy there were not too many opportunities to look at this week. I’ll share some top opportunities to review below and then focus on VST

SN leading recent IPO with a range breakout up the right side of it’s base. Love the upside reversal the day before off the moving averages with RMV going to 0. The next day you get a slight gap down before a push through allowing you to manage risk at the breakout low of the day (around 2% stop)

JETS gap and go following through on teh upside reversal off the 50 sma. Jets have been a leading theme. Would have had to act quickly at the open monday for this one.

GEV gave you 2 shots at the 10ema/ base pivot pullback. also confluence with S2. Watching for follow through higher here. This VST, CEG strongest theme

FUBO news catalyst gap on Jan 6. Formed an intraday base at the open and pushed through the daily VWAP

CEG undercut and rally of moving averages wednesday and then gap and go on news of an acquisition of another company Fri.

WGS vcp breakout from inside day

The best opportunity however this week was entering VST which has shown relative strength during this market chop and set up a pullback spot on the 10ema

Daily Chart:

Discovery

To get VST on your radar you would need to be watching leading themes and regularly scanning stocks with top relative strength. On a 12 month basis, VST has an absolute strength rating in Deepvue of 98, a 3 month of 88, and has been on the Deepvue Leaders screen preset for quite some time.

It has been a part of the SMR nuclear power theme which became apparent in the fall of last year.

On a shorter term basis. VST formed a higher low while the market made a lower low and stood out last week with a strong move higher. It has been in an RS phase since that move.

I have also regularly featured it in the trade lab over the past few months including on Jan 7, the day before the first entry described in this article where it stood out after putting in a strong upside reversal near the pivot

Jan 7 comments:

Setup and Execution

The setup for VST was a pullback to a key moving average, in this case the 10ema.

VST had made a standout move off the lows of the consolidation and when this is the case we are watching for a range/higher low to form with a pivot at the highs or a pullback to a prior key level such as the increasing 10/21 emas.

With this setup and entry tactic, we are looking to enter on a reversal up from the key moving average setting a stop just below the level.

For pullbacks to a key level, I am setting alerts just above the key level to be notified when the stock is approaching it, then I am watching either for a intraday extension down into the level OR a controlled pullback and range that builds around the higher timeframe area.

Moving averages are not magical, they merely give us a reference point of where to look for a potential reversal back higher in an already strong stock after a pullback.

Intraday here is what we are looking for in terms of a stock respecting a level:

We can look to enter and start building a position as it approaches the level, or after it shows respect.

The entries should be tight but logical, and for a 10ema key moving average pullback, your stop after it pushes higher should be slightly (~0.1%) below the level.

If your setup & entry tactic is a bounce off the 10ema, if it loses that level after your entry you would exit. It can always reset or form another setup if you are stopped out.

What you don’t want to do is say you are entering on the 10 ema bounce and then when it loses that level change your stop and reason for putting on the trade. If it violates your entry tactic, listen to the feedback

Here is VST on a 15 min on wednesday:

On a 15 min chart I use a 200ema (blue) to approximate the daily 10ema and a 526 ema (purple) to approximate the 21ema.

We see VST respect the level rally from it, retest and slightly undercut it and then rally off of it for good.

Similar to how we trade versus the low of ranges, you could be building your position as it pulls into the level with say a 1% initial stop. Then when VST starts rallying up adjust it to just below the level (the 0.1% I mentioned earlier). The closer to the level your cost is the easier it is to manage risk versus it.

VST closed that day about 4% off the 10ema, a good cushion to hold a starter position through with the intent of adding on the next entry tactic, likely on follow through up.

The next day VST broke expectations somewhat with a very quick flush to the 10 ema area again in the morning. This would actually be another potential entry area around the 10ema/ S1 (Standard Pivot) managing risk below the low of the day

It then rallied strongly, and attempted to push through the previous daily high. This may have been an add point but depending on your stop on this add you may have been stopped out. (it pulled back 3% intraday after the first attempt to break out)

It then reset and formed a nice intraday base before retaking the pivot and pushing into the end of the day and closing well. This retake of the pivot would have been the best add point.

Friday Price Action 15 min:

On a daily this is what VST looks like currently You can see the Undercut and rallies of the 10ema.

Future thoughts

VST is a leading name in a leading theme with strong sister stocks CEG and GEV. They are currently acting much better than the market.

While it did poke its head above the pivot last week I will be watching closely for follow through and what it to push out sharply on volume.

If it forms a tight inside day before really breaking out that would almost be preferred, adding some nice coiling to it for greater velocity up.

If it does break out strongly, if your cost is near the 10ema you have options to trail it at that level which is respected and trended above in the strongest breakouts, or back stop at the low of the breakout day which would be above your cost.