This pattern, and set up I will talking about in this post today was coined by Evan Lazarus (@LazT3Live). Evan is a trader at T3Live. T3Live specializes in teaching trading, and self-directed financial freedom with the stock market.  As a team, they do a great job at explaining things and putting it into the understandable concepts. This is just one of my favorite set ups that happens to be apart of their reservoir of information.

The “Catch Play” in it’s most basic form is a flag (bull or bear) into  a rising or falling moving average. The advantage of this type of flag versus a regular flag is that is guarantees price is not extended (by “extended” I mean overbought or oversold, I just do not use those terms). The other major advantage to this type of pattern is that gives you a clear, defined, and low risk place to trade against.

The set up here to engage in
this trade would ideally be when a candle pushes up or down into the falling/rising moving averages, then is rejected there and closes near the low or the high of the that candle, depending on the direction of the trend.

Let’s look at an example. Click to enlarge image.

2-28-2013 SPY 5 minYou can see in the image above that the price broke the uptrend that it had been trading on, then held below the Moving averages, bounced into them, and finally failed. This is an example of the “catch play”.

Here is another one if you did not quite get that one, same concept –

2-25-2013 SPY CATCH

 

The whole premises around using this strategy is to catch quick momentum moves. The moving averages really help you gauge the stocks psychology and the the likely hood of  a momentum play. This pattern is visible on all time frames, however it is most commonly used and seen on the intraday charts as those give you the quickest trades. If you do see them on the daily though, they work the same way. For example, the miners recently have been trash. Let’s take a look at a catch play in that sector to the short side –

3-3-2013 GDX CATCH

 

Now that we have viewed many charts, and many examples of one of my favorite patterns it is your turn to go try it out and look for them. Please let me know if you have any questions regarding it, and I will do my best to answer them. My contact info is – @BenCBanks (Twitter/StockTwits) and email (Contact page). Below is another chart just going over the basics of this pattern again. Have a nice day.

THE CATCH PLAY