Years before these daily briefs existed, I did something selfish: I wrote a swing trading book just for me. No fluff, no filler – just the setups I’d obsessively tested across thousands of charts. It lived on my desk as a battered, coffee-stained playbook for years.

Today, I’m sharing one of those setups – the Holy Grail pattern –

If this resonates with you, grab the full book here Swing Trading With Wall Street 

The Holy Grail Pattern blueprint

Why This Setup Works

"Simplicity is the ultimate sophistication." - my dog Cowboy

This institutional favorite was pioneered by legendary trader Linda Raschke - she was featured in one of my favorite books Market Wizards, and for good reason. The Holy Grail pattern cuts through noise by focusing on one truth: strong trends rarely die quietly. When a powerhouse stock pulls back to its 20-day moving average for the first time after a surge, it’s like compressing a spring - the rebound can be explosive.

important: Combine institutional-grade trends with retail-friendly timing. Let Wall Street do the heavy lifting, then swoop in when weak hands panic.

Spotting the Perfect Setup

1. The Foundation

• Catalyst-Driven: Ideal candidates gap up 10%+ on earnings/news (institutions can’t ignore these)

• Price Action: Higher highs/lows, stacked green candles, no distribution

• Avoid: Sluggish "grind higher" charts - we want conviction

2. The Pullback

A true Holy Grail pullback:

• "Slow Bleed" Decline: 3-5 days of controlled selling (no 10% daily drops!)

• Volume Fades: Declining volume = weak sellers, not panic

• Hugs the 20-day: EMA or SMA both work - I prefer EMA for responsiveness

• First or Second Touch Only: Third time’s not a charm here

3. The Trigger: Institutional Re-Entry

Wait for:

• A hammer candle (the ultimate "rejection" signal)

• OR a bullish engulfing pattern with volume spike

• Bonus: A false breakdown below 20-day that snaps back (traps bears)

  

Execution

Entry Checklist

1. Uptrend confirmed (check weekly chart)

2. First/second pullback to 20-day

3. Volume < 50% of 10-day average during decline

4. Bullish reversal candle forms

Entry: Buy above reversal candle high
Stop Loss: 1-2% below pullback low (never give the market charity hard stop gets placed as soon as trade gets entered)

Profit Targets

• Minimum Target: Prior swing high (institutions defend these)

• Home Run Potential: Trail stops under 20-day EMA as it rises

• Pro Move: Scale out 33% at first target, let rest ride with trailing stop

Wisdom: Avoid These Pitfalls

But it’s cheap now!" → Never catch falling knives - wait for the reversal candle
FOMO on later pullbacks → Stick to first/second touch only
 Ignoring sector trends → Trade WITH the tide, not against it

Your Holy Grail checklist

1. Scan weekly for stocks up 18%+ in 3-5 weeks (earnings gaps preferred) this is a momentum based setup

2. Mark 20-day EMA on charts - watch for "wedging contraction" price action

3. Wait for volume dry-up → institutional hands aren’t selling

4. Stalk the reversal candle → This is your invitation

5. Manage ruthlessly → Protect capital, trail winners

Common Reasons Traders Fail This Pattern

• Chase pullbacks without a catalyst (no institutional interest)

• Enter before confirmation (guessing vs. reacting)

• Use wide stops ("hoping" instead of managing risk)

• Ignore sector weakness (market breadth is everything when timing entries)

Final Word: The Holy Grail isn’t about complexity - it’s about pattern recognition + iron discipline. When I see that first clean pullback in a sector leader, it’s not just a trade - it’s the market handing me a gift. I wrap my hands around it.

So thats the jest of the holy grail setup, if your into this kind of readings snag my book here!

Stay Curious 🙂 

- John

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