Finding The Golden Triangle by Charlotte Hudgin
A Shining Opportunity
Do you find yourself frequently missing profitable setups? Here’s one way to capture most, if not all, of them.
Have you ever sat on the sidelines, annoyed, watching as a stock continues to rise? My golden triangle setup can help cure that problem by identifying more entries that work.
A setup I call the Armchair Investor Golden Triangle is an important refinement of the buy-on-a-dip strategy. Golden triangles form when a fast-growing stock pauses for some minor profit-taking and then continues on its upward trend. Careful analysis of price and volume action during the pause can point to the stocks most likely to return to a vigorous uptrend. The reversal at the bottom of the pullback can be an entry at a favorable price. I have bought golden triangles in stocks that have risen 20%, 50%, or more before they showed sell signals. Of course, your results will vary.
THE GOLDEN TRIANGLE SETUP
Here are the steps to identifying the Armchair Investor Golden Triangle:
1. The prior rise. In Figure 1, you see an example of the ideal golden triangle. Look for a stock’s price rising faster than its 50-day simple moving average (SMA). I also check for white space between price bars and the SMA. The more white space, the higher the momentum.