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Pullback Criteria

I have read several technical articles as to what constitutes a pullback on a daily chart. They include various opinions:

A) 3-5 black candlesticks ( Close<Open)
B) 3-5 Lower Highs
C) 3-5 Lower Lows
D) 3-5 Lower Closes
D) A combo of the above

I struggle with which criteria to enter into my advanced scans. Comments as to what is the true indicator of a daily pullback ?




  • Options
    I think a pullback is in the eye of the beholder. You have to decide what it is for your trading purposes.

    Individual stock behaviors are highly variable, so no one definition is going to fit all circumstances. When a stock is trading in a narrow range, 3-5 of anything will not look like a pull back. On the other hand, unexpected bad news may cause a one day drop that would qualify in points as a pullback, but then recover before 3-5 of anything occurs.

    There are other ways to capture a pullback as well, using overlays and indicators. You could test for a short term MA - maybe 3 to 5 days - turning down. You could use Fast or Slow Stochastics crossing under 20 after being above 80 in the last 10 days - experiment with the parameters to see what works best. You could look for a low crossing below a short term price channel - maybe 7 or 10 days. And so on.
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