The Slingshot Pullback Pattern - How To Trade Pullbacks

Key Concepts

• Auction Process: Viewing the market as a continuous auction between buyers and sellers to determine price levels where demand or supply is exhausted.
• Slingshot Setup: A pullback strategy defined by a crossover of the 4-day Exponential Moving Average (EMA) relative to recent highs, signaling a trend resumption.
• Fish Hook Setup: A strategy for trading "Episodic Pivots" (EPs) or significant gap-ups, focusing on entering after the initial volatility settles and the stock demonstrates sustained demand.
• Icarus vs. Atlas Levels: A mental framework where "Icarus" represents levels where price flies too high and gets rejected (supply), and "Atlas" represents levels that hold the weight of the market (support/demand).
• Price Congestion: Areas where price spends significant time, indicating a "comfort zone" for traders and reliable support/resistance levels.
• Episodic Pivot (EP): A seismic change in a company’s fundamentals (earnings, contracts, etc.) that triggers a massive, sustained trend.

1. Trading Philosophy and Methodology

The speaker emphasizes that price is the only objective truth. While financials and earnings drive stocks, these are already reflected in the price. The core methodology involves:

• Performance Optimization: Moving beyond simple indicators to understand the "auction" taking place on multiple time frames (10-minute, hourly, daily, weekly).
• Moving Averages: The speaker argues that moving averages are often overrated and can be "sliced through like butter" if there is no underlying price support (congestion) at those levels.
• Multi-Time Frame Analysis: Using a 10-minute chart to observe the auction process, as it best reveals whether a price spike is a genuine move or just noise.

2. The Slingshot and Fish Hook Frameworks

• Slingshot (Pullback Setup):
  • Objective: To enter at the lowest risk point during a trend.
  • Criteria: Price must climb back over the average of the highest prices of the last four days.
  • Distinction: It is not a breakout; it is a pullback setup. If a stock is just breaking out without a prior pullback, it is not a "Slingshot."
• Fish Hook (Gap Setup):
  • Objective: To trade EPs without chasing the initial gap-up, which often leads to being stopped out by profit-taking.
  • Process: Wait for the stock to consolidate after the initial gap. If it can retake the closing price of the first day or a key pivot level, it indicates that "big money" is stepping in to support the move.

3. Identifying Pivots and "Ladders"

The speaker views price levels as "rungs on a ladder."

• Wicks: Price spikes (wicks) that form in the first 10–20 minutes of the day are often ignored as "price exploration" rather than true auction levels.
• Building Above Levels: A stock is only considered "ready" when it builds a trading range above a previous rejection point. If it wicks and immediately falls back, the sellers are in control.
• Support/Resistance: Once a level is established as a "rung," it can remain relevant for months or years. Support often becomes resistance and vice versa.

4. Risk Management and Sizing

• Risk per Trade: The speaker limits risk to 1% of total equity per trade.
• Position Sizing: Sizing is determined by the distance to the stop and the stock's volatility. "Tight" stocks allow for larger positions; "wide and loose" stocks require smaller positions.
• Mental Trading: The speaker advocates for keeping a journal (e.g., TradingView/TraderView) to annotate charts and "mentally trade" setups to gain experience without risking capital.

5. Notable Quotes

• "All the only thing that you need to know is price."
• "Moving averages are overrated. The price is supported at these congestion points and not just because a 50-day moving average is there."
• "Time at price is more important than volume at price."
• "You're not that smart when things are all working... and you're not that dumb when things aren't working."

6. Synthesis and Conclusion

The speaker’s approach is a transition from mechanical indicator-based trading to a context-driven auction model. By focusing on where price finds "comfort" (congestion) and identifying when demand overcomes supply (the "Fish Hook" or "Slingshot"), traders can enter positions with tighter stops and higher conviction. The ultimate takeaway is to stop chasing breakouts blindly and instead wait for the market to prove its intent by building a base above key pivot levels.