Dave's reversal rule

I am not Dave, not even close. So this is one of his rules that I found useful.
You can read his blog at http://chartsignals.blogspot.com/

Setup
Entry:
1 - There must be a double bottom or slightly lower low chart pattern for an upside reversal. For downside reversal there must be a double top or slightly higher high chart pattern.
2 - There must be a bottom/top candlestick reversal pattern present on the second high.
3 - There must be a positive divergence for an upside reversal and a negative divergence for a downside reversal in the stochastic indicator.
Buy Signal: Buy on confirmation of the candlestick pattern.

Exit:
4 - Initial stop loss is set 20 cents below the low of the candle pattern for an upside reversal and 20 cents above the high of the candle pattern for a downside reversal.
5 - Once the trade produces a profit of $1.00, stop loss is moved to breakeven (the entry price).
6 - Once the eight day MA moves past the breakeven point the eight day MA becomes the trailing stop. The trailing stop is the Target Price.


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