Cycle of Price Action
Model Book
THE CYCLE OF PRICE ACTION
THE FULL CYCLE OF PRICE ACTION
REVERSAL EXTENSION
Look for a defined support level on a higher timeframe.
When price approaches the higher timeframe level, it must be extended
from the 10 EMA on the lower timeframe chart (air between price and the
moving average).
When the stock starts to put in a reversal bar, go long.
Heavy volume capitulation on the reversal bar is a key ingredient in this
setup. Initial stops go below the low of the reversal bar area.
First profit target is the 20 EMA on the trading timeframe.
Stops move to cost when partials are taken with discretion used toexit the
remaining shares.
WEDGE POP - THE MONEY PATTERN
Price trades in a tight range as it works lower.
Often for longs, the stock is showing relative strength to the underlying index.
The 10/20 EMA should be tightening, showing a lack of overall momentum
despite being “dragged” in the direction of the underlying market.
When price recaptures the tight 10/20 EMA, go long with a stop below the
near-term price consolidation.
Ride the EMAs as a trailing stop once the trade triggers.
EMA CROSSBACK
Price has already recaptured the 10/20 EMA on the chart to be a
candidate.
It then pulls back into the 10/20 EMA for the first time.
Buy the stock against the 10/20 EMA.
Stops are placed below the moving averages.
Raise stops in a trailing format with the 10/20 EMA.
BASE N’ BREAK
Price will build a basing pattern finding support at the 10/20 EMA.
This is often a slightly longer consolidation rather than a short 1–3 day pullback.
Buy against the moving averages with confirmation adds on the base
breakout.
Stops are placed at a loss of the moving averages.
Ride the moving averages higher while selling into pops away from the 10 EMA
moving average with final stops at a loss of the EMAs.
EXHAUSTION EXTENSION
This is blowoff/euphoria and a sign the market may be topping.
The further you get into an uptrend and the more extensions you get away from
the 10EMA the more likely a stock is to re-base.
The second extension from the 10EMA is generally a good place to take profits.
If you get a third extension you are often getting late in the intermediate term
trend.
WEDGE DROP
This is the first time the market drops down across the moving
averages after an Exhaustion Extension.
The Inverse of the Wedge Pop
EMA CROSSBACK
Now we’re back to a crossback, but this time we’re in a down
trend and rallying up into the moving averages.
Often shorter duration than during the up-cycle
BASE N’ BREAK
A Longer consolidation during the down cycle.
These are ofter shorter and there may be less than during
uptrends
Will the patterns always be present, never skipped and follow that perfect set of steps?
No. That is not the point. This a framework to think about price.
These steps are simply a guide to keep us out of trouble, on the right side of the market, prevent chasing, and help make
disciplined risk/reward decisions.
The goal is to combine multiple different timeframes so you can capture a higher timeframe trend while defining your risk with a
lower timeframe entry.
FULL CYCLE EXAMPLES
NVDA Oct 21
Wedge Pop
EMA Cross Back
Reversal Extension
NVDA Oct 21
Exhaustion Extension
Base n Break
Lower High
EMA Cross Back
Wedge Drop
Wedge Pop
Base n Break
UPST Nov 2023
Lower High
Base n Break
Wedge Drop
Wedge Pop
EMA Cross Back
Reversal Extension
AFRM Nov 2023
EMA Cross Back
Base n Break
Wedge Pop
EMA Cross Back
Wedge Drop
ELF Weekly 2022-2024
Base n Break
Lower High
Base n Break
Base n Break
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
Wedge Drop
Wedge Pop
TSLA 2019-2020
Exhaustion Extension
Lower High
EMA Cross Back
Base n Break
Wedge Drop
Base n Break
Wedge Pop
EMA Cross Back
Base n Break
TSLA 2019-2020
Base n Break
Wedge Pop
EMA Cross Back
Reversal Extension
TSLA 2019-2020
Exhaustion Extension
Base n Break
Wedge Drop
Base n Break
Base n Break
Wedge Pop
TSLA 2019-2020
EMA Cross Back
Wedge Drop
Base n Break
Wedge Pop
NET 2021
Base n Break
Base n Break
Wedge Drop
Wedge Pop
EMA Cross Back
NIO 2023
Base n Break
EMA Cross Back
Base n Break
Wedge Drop
Wedge Pop
Base n Break
EMA Cross Back
MARA 2023
Exhaustion Extension
Lower High
EMA Cross Back
Base n Break
Wedge Drop
Base n Break
Wedge Pop
EMA Cross Back
AFRM 2023
EMA Cross Back
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
Wedge Drop
UBER 2023
Wedge Pop
Wedge Pop
Base n Break
Base n Break
Wedge Drop
Wedge Drop
Reversal Extension
Wedge Pop
EMA Cross Back
UBER 2023
Wedge Pop
Wedge Pop
Base n Break
Base n Break
Wedge Drop
Wedge Drop
Reversal Extension
Wedge Pop
EMA Cross Back
REVERSAL EXTENSION EXAMPLES
SQ Reversal Extension
Reversal Extension
NOW Reversal Extension
Reversal Extension
TSLA Reversal Extension
Reversal Extension
ROKU Reversal Extension
Reversal Extension
V Reversal Extension
Reversal Extension
TWLO Reversal Extension
Reversal Extension
ENPH Reversal Extension
Reversal Extension
PTON Reversal Extension
Reversal Extension
NFLX Reversal Extension
Reversal Extension
NIO Reversal Extension
Reversal Extension
Wedge Pop Examples
NVDA Wedge Pop
Wedge Pop
NVDA Wedge Pop
Wedge Pop
NVDA Wedge Pop
Wedge Pop
AMD Wedge Pop
Wedge Pop
SEDG Wedge Pop
Wedge Pop
SHOP Wedge Pop
Wedge Pop
EMA Crossback & Base n Break Examples
BLDR Crossback + Base n Break
Base n Break
EMA Cross Back
AFRM Crossback + Base n Break
Base n Break
EMA Cross Back
PATH Crossback + Base n Break
Base n Break
EMA Cross Back
ABNB Crossback + Base n Break
Base n Break
EMA Cross Back
NVDA Crossback + Base n Break
Base n Break
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
Base n Break
CAMT Crossback + Base n Break
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
BLDR Crossback + Base n Break
Base n Break
Base n Break
Wedge Drop
Wedge Pop
EMA Cross Back
ZS Crossback + Base n Break
Base n Break
Base n Break
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
TWST Crossback + Base n Break
Base n Break
Base n Break
Wedge Pop
EMA Cross Back
Exhaustion Extension Examples
ETSY Exhaustion Extension (Weekly)
2nd Extension
1st Extension
AI Exhaustion Extension (Weekly)
3rd Extension
2nd Extension
1st Extension
ABNB Exhaustion Extension
Exhaustion Extension
Wedge Drop Examples
UPST Wedge Drop
Wedge Drop
QQQ Wedge Drop
Wedge Drop
NET Wedge Drop
Wedge Drop
NET Wedge Drop
Wedge Drop
NVDA Wedge Drop
Wedge Drop
QQQ Wedge Drop
Wedge Drop
QQQ Wedge Drop
Wedge Drop
SHOP Wedge Drop
Wedge Drop
TDOC Wedge Drop
Wedge Drop
SQ Wedge Drop
Wedge Drop
EMA Crossback and Base n Break
Examples
NFLX
Lower High
EMA Cross Back
Wedge Drop
Base n Break
ZIM
Lower High
EMA Cross Back
Wedge Drop
Base n Break
ZM
Lower High
EMA Cross Back
Wedge Drop
Base n Break
TDOC
Lower High
Wedge Drop
EMA Cross Back
Base n Break
Base n Break
QQQ
Lower High
EMA Cross Back
Wedge Drop
Base n Break
Base n Break
PYPL
Lower High
EMA Cross Back
Wedge Drop
Base n Break
Base n Break
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