Quarterly Reversal Play: Trend Shift and Bounce Chu-Chu Play

Last week I got another big kill in the stock market. I start accumulating $CHP when the price hovers above the 1.04 level. If you look at the chart below, 1.04 is exactly the same level where the support-turned-resistance was broken, and the price made a breakout from that level. However, there is another ninjutsu I used on this trade that gives me the higher conviction and thus, increasing my position size.

Quarterly Reversal Play CHP chart

Quarterly Reversal Play

That trader-no jutsu I am talking about is “Q-reversal chu-chu” technique. Sorry for the term used, I really do not know what to call that methodology. In this post, I going to share how I go over this Q-reversal process.

CHP portsnap

Quarterly reversal play is actually a bounce play but in a longer time frame, and from the name suggest we are using a quarterly timeframe.

If you are familiar with the ODR or On the Day Reversal or One Day Reversal, then you will understand this Quarterly reversal easily because the concept is very much the same.

ODR is where the daily candle of a certain stock was so bearish on a certain point of the trading day and on the same day the price recovers and the closing price prints a bullish candle.

Q-Reversal Set-up and parameters

To qualify for this Quarterly Reversal Play, one needs to consider some parameters. First, the trend of that issue should be coming from a downtrend for at least 9 months. If you switch to a quarterly candle you should see at least three long red or bearish quarterly candles followed by a pause or stop quarter.

The second step is looking for a signal candle for a reversal move. Usually, you will find a signal bar to bounce from a parallel Darvas support prior to the reversal. Given that the parallel Darvas support holds its base, the next thing you should be looking for is the bullish signal.

Once you see the quarterly candle made a reversal from bearish to bullish, you can start accumulating shares of that issue. For risk management, always be on guard when the price did not follow your bias and expectation. I usually cut my losses or exit my position when the price returns below the unchanged level (The quarterly candle opening price)

You can set the quarterly opening price as your cut loss point.

Alright, hope you learn something from this post. If you want to use and follow this set-up, I recommend you approach every trade from a perspective of risk management.