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Trader toolkit: Pinball pattern

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There are a multitude of technical patterns out there, but one that I’ve found that works consistently is the pinball pattern. It might sound odd to anyone who plays pinball — thinking that there’s no real pattern to playing the silver ball — and it’s important to know that the pinball pattern doesn’t always work, but this is a simple technical pattern worth looking for.

Pinball pattern explained

To identify whether a stock is exhibiting a pinball pattern, you first need to see the stock in a definable downtrend. Specifically, you want to see the 8-period exponential moving average below or equal to the 20-period simple moving average. Additionally, the 20-period simple moving average (SMA) should be below the 34-period exponential moving average (EMA). Moreover, the 34-period EMA should be below the 50-period SMA, which should be below the 200-period SMA.

Next, the stock should be forming a bottom. Thereafter, you want to see if there is a gap of more than 10% between the 8-period EMA to the 34-period EMA. Following this, the previous day’s close must be above the 8-period EMA.

After all that, you would buy on positive trading above the 8-period EMA.

Here’s an example from the daily chart on the iShares NASDAQ Biotechnology Index Fund (IBB).

Source: TradingView

In this chart, all of the moving averages are properly aligned (shorter moving averages are below the longer ones in sequence). It extends out to the 34-day exponential moving average, which is below the 50-day and, in turn, the 200-day simple moving average. Additionally, there is more than 10% between the 8-day EMA and the 34-day EMA.

Let’s assume you see this price action, and got into IBB long.

Source: TradingView

If you’re risk tolerant and were able to hold through some choppy trading, here’s how the trade would have turned out.

Source: TradingView

The bottom line

The pinball pattern is a good addition to your toolkit, but get plenty of practice scanning for this pattern before putting cold, hard cash on the line. You’ll need to set hard stops; if you have a high tolerance for risk, those will be below your entry point or at the most-recent lows, whereas a more risk-averse investor should consider stopping out if the price breaks below the 8-period EMA.


   Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs.

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