My Favorite Setup of All Time
AAOI, AEHR, MU, AMD, and others had this exact same chart.
Some chart patterns have a higher success rate than others.
I call those setups lightning in a bottle. They’re rare.
Whether it’s AAOI, AEHR, MU, AMD, or many others, this is the setup that preceded their monster moves.
The market rarely hands you a perfect pitch but there’s one setup I consider my favorite of all. And not many people talk about it.
I see people compare technical analysis to astrology all the time but I strongly disagree. At its core technical analysis is market psychology at the highest level.
TA is simply understanding where buyers and sellers are likely to react based on price, trend, volume, and widely watched levels. In a sense TA can become self fulfilling.
When a stock pulls into a major moving average, level, etc. people notice. A lot of market participants are watching the same exact areas.
Those spots bring in buyers because traders know other buyers are watching there too. If enough people are focused on the same level it naturally creates volume. I look at TA is predicting where the crowd may react and putting yourself in spots where the reward makes sense relative to the risk.
In my view, technical analysis and charts are simply a visual representation of human behavior and psychology.
And there are major ways to capitalize on that.
If you’re not already in the subscriber chat, I strongly suggest paying attention to it.
This is where I post all of my new trading positions and walk through the thesis behind each trade including my thesis, the risk level, and more.
Last week I alerted subscribers that I added three new positions.
TE at $6.4x
FLNC at $17.8x
NET at $204x
And I also added a new position today in an AI infrastructure stock that nobody is talking about… yet.
This is also where I post a daily thread with my thoughts on the day ahead, relevant headlines and macro events, my main focus names, notable upgrades and downgrades, and anything else I’m watching.
The chat itself has basically become a live market group chat. We have a ton of smart people sharing ideas, setups, headlines, and observations throughout the day, and there’s a lot of genuine alpha in there.
I honestly think it might be one of the most (if not the most active) subscriber chats on Substack.
In the remainder of this article I’m going to discuss arguably my favorite chart pattern, how you can trade it, annotated examples with major winning stocks, how to identify this pattern when scanning, and much more. I strongly believe this setup is one of the strongest and most powerful patterns in the entire market, and it’s evident by the moves that followed this pattern forming on the charts.