The Chip Plays

 

This is just a bad name for a Pullback play. Here are the Rules:

• Stock is above a flat to rising, rising preferred, 50 day moving average
• The Stock has hit a three month High in the last 10 days
• The Stock is in a Pullback – two or more lower highs
• The stock has positive Chaikin Money Flow
This set up has four types of lies.
The first and the safest play is the Second Chance Chip. This is where a pivot point forms during the pullback. Basing your entry off the pivot high gives you more confirmation that it’s a real move. The down side to this is a wide range between your entry point and your stop. It’s a low risk to low reward type of a set up. Dave Landry calls this play a False Rally Pullbacks.

The second type of set up is called the Naked Chip. The naked closed, which is what Joe Stowell called them. This is simply where the CLOSE of today is less than the Low of yesterday, making it a down day. The play is off the quick change in thinking that can occur during trends.

The third type is referred to as the Cleaner Chip. This set up goes by many names – Trend Knock Out, TKO, Trend Cleaner, Cleaner, ect. This is simply where the stock puts in a large range candle that appears to have triggered several stops, cleaning the way for a continuation of move with the trend.

The fourth is just a Standard Chip. This is basically all other pullbacks, until I name them all! These all work in the short world as well, just flip the rules.