After a strong, short term rally traders are usually looking for an opportunity to buy on a pullback. One would assume that a strong move would not immediately erase itself and that there should be opportunity when prices "take a break". The million dollar question is when is the right time to buy as the stock pulls back? There are many different interpretations of what is a good pullback and many technical traders have their own approach to determining an appropriate entry, and while the industry will argue one way over another, one thing all traders tend to agree on is that there is one point where you do NOT enter. Hopefully today we can shed some light on this and save you some money.

The one point that most traders will not enter on a pullback is called the "one bar pullback". While there are ways to find an entry after the one bar, it is most common that traders will avoid the first bar of a pullback. So what does that mean in particular? Well after a strong, multi-day move up let's say, you would not want to be the buyer after only one down day. 68% of the time the stock will continue to pullback or move sideways. Think of someone who is running a race, if they sprint for a few days it will likely take them a few days to rest it off.

If you take a look at a candlestick chart of most any symbol you will see that after strong moves up or down the first reversal bar is usually just the start of the reversal. Even in times where the first reversal bar is immediately erased and the trend continues, its usually not a highly profitable move, and you may even notice sideways movement from there.

Hopefully this is a good example that lets you avoid chasing a stock after only one down day. With a little patience you can jump on a strong stock, hopefully at better prices.