Entry Tactics
Character Change
My go-to setup for getting into possible new uptrends early, three pieces of evidence on the weekly chart that tell me the trend may have changed.
Nick SchmidtPublishedUpdated
A character change is what I call the transition from a long downtrend into the early stages of a possible new uptrend. I use weekly charts for this because they help me cut through the noise and stay focused on the larger trend.
There are three pieces of evidence I look for:
APP (AppLovin). All three pieces of a character change on the weekly chart. 1: Huge volume surge with a strong move showing a change in participation. 2: Higher low after a long downtrend. 3: First moving average respect giving me a low-risk entry.
1
Volume Surge
A large volume spike with a strong price move is my first piece of evidence. It cannot identify the buyers, but the biggest volume in months tells me participation changed enough to pay attention.
2
Higher Low
After a long downtrend, the stock makes a higher low on the weekly chart. This alone is not enough for me to act on, but it is my second piece of evidence that selling pressure may be easing and demand may be showing up at a higher price. These first two can happen in either order; I just want to see both.
3
New Moving Average Respectoptional
The stock pulls back and holds a key moving average for the first time, usually the 10-week or 30-week, though I may use the 4-week depending on how early the setup is. This is optional, but it can give me a tight stop just below the moving average. If it fails, I am out with limited risk. If it works, I have a way to participate early in the possible new trend.
Once I have 1 and 2, I have enough evidence to consider that a new trend may be starting. Adding 3 gives me the lower-risk entry I prefer.
What does it mean to respect a moving average?
A moving average becomes relevant to me when I can see that it mattered looking left on the chart. In APP's case the 10-week MA acted as resistance through the downtrend: price kept bumping into it from below for months and getting rejected instead of chopping through it. When the stock later used that same 10-week as support, I treated the flip as meaningful. That is what respect looks like in my process: price pulls back to the line and bounces where it previously rallied into the line and failed. The history is why I do not dismiss the later hold as just another random touch.
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