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Swing Trading Success: Mastering the Shakeout Demand Tail Setup

Jack Corsellis
May 24, 2025

Are you struggling to find a swing trading strategy that actually works? Tired of complex systems that promise the world but deliver little? There's a simple yet effective technique that could change your game: the Shakeout Demand Tail.

This setup is a variation of classic Japanese candlestick patterns. It's all about spotting potential buying pressure after a price dip. The key? Finding these patterns around specific moving averages.

For a full visual guide, check out this video on the Shakeout Demand Tail.

Understanding the Shakeout Demand Tail

What exactly is a Shakeout Demand Tail? It's a candlestick pattern (or a close relative) that suggests buyers are stepping in after a period of selling. It's not just any hammer, doji, or teuri line. The context in which it appears is crucial.

Think of it like this: the price dips, potentially scaring out weaker hands, but then buyers emerge, creating a "tail" on the candlestick. This shows that demand is present, and the price might be ready to reverse.

Key Moving Averages to Watch

The Shakeout Demand Tail is most powerful when it forms around specific moving averages. These act as potential support levels, where institutions might be looking to buy.

Here are the key moving averages to watch:

  • 50-day Simple Moving Average (SMA): A widely followed average that smooths out price data over 50 days.
  • 65-day Exponential Moving Average (EMA): Similar to the SMA, but it gives more weight to recent prices.

Why these moving averages? They're popular among institutional investors. This makes them potential areas where buying support can emerge. When you see a Shakeout Demand Tail form near one of these levels, it suggests that the "big boys and girls" might be stepping in.

The Power of Thematic Confirmation

What if you could increase your odds of success even further? You can by focusing on themes or sectors.

If you see the Shakeout Demand Tail setup across multiple stocks within the same sector, it's a much stronger signal. This indicates broad-based strength in that theme, increasing the likelihood of a successful trade.

Trading in Themes

Trading in themes means focusing on groups of stocks that are related to the same industry or trend. If one stock in a theme is showing strength, it's often a sign that the entire theme is poised to move higher.

Precious Metal Miners Example

Let's look at the precious metal miners example from the members video on May 15, 2025, where I covered a session plan that highlighted several stocks in this sector.

These stocks included:

  • Kinross Gold
  • Wheaton Precious Metals
  • Eldorado Gold
  • AngloGold Ashanti

The interesting thing? All these stocks displayed the Shakeout Demand Tail pattern around the same time. This wasn't just one isolated case. It was a sector-wide signal of potential strength.

The Group ETF (GDX) and Gold Proxy ETF (GLD)

To get even more confirmation, you can also look at the GDX (gold mining ETF) and GLD (gold ETF). If these ETFs are also showing similar patterns, it strengthens the case that the entire sector is ready to move higher.

The more correlated assets showing the same pattern, the greater conviction you can have in the trade.

Beyond Precious Metals: Applying the Concept to Other Sectors

This concept isn't limited to precious metal miners. You can apply it to any sector or theme.

Consider the NVIDIA example from the video. If NVIDIA is forming a Shakeout Demand Tail, you might also want to look at other semiconductor stocks, such as:

  • Broadcom (AVGO)
  • Taiwan Semiconductor (TSM)
  • AMD
  • SMCI
  • ALAP

If you see the same pattern in multiple semiconductor stocks and even the QQQ ETF (which tracks the Nasdaq 100), it strengthens the signal.

Where to Find the Shakeout Demand Tail

It's not enough to simply identify the candlestick pattern. You also need to consider where it's forming on the chart.

Pullbacks and Consolidations

The Shakeout Demand Tail is most effective when it forms on a pullback to a key moving average or during a sideways consolidation. You don't want to see it on a V-shaped rally.

Think of it this way: the pullback or consolidation creates an opportunity for buyers to step in at a lower price. The Shakeout Demand Tail is a sign that they're doing just that.

Leading Stocks in Leading Themes

Ideally, you want to see the Shakeout Demand Tail on a pullback to a key moving average in a leading stock within a leading theme. This is where you're most likely to find institutional support.

Remember the precious metal miners example from 2025? At that time, they were a leading theme. When those stocks pulled back to their 50-day or 65-day moving averages and formed Shakeout Demand Tails, it was a strong signal that institutions were stepping in to support them.

The Shakeout Demand Tail acts as a visual confirmation of that institutional support.

Order Entry: The Buy Stop Limit Order

Once you've identified a Shakeout Demand Tail setup, you need a plan for entering the trade. A common order entry method is the buy stop limit order.

Introduction to the Buy Stop Limit Order

This order type is discussed in books like Stan Weinstein's "Secrets for Profiting in a Bull or Bear Market" and Nicolas Darvas's "How I Made $2,000,000 in the Stock Market." It allows you to enter a trade at a predetermined price while also limiting your risk.

How a Buy Stop Limit Order Works

A buy stop limit order has three components:

  1. Buy Stop (Trigger Price): The price at which the order becomes active.
  2. Limit Price: The maximum price you're willing to pay.
  3. Stop-Loss: An order placed to limit potential losses if the trade goes against you.

Example: Eldorado Gold (EGO)

Let's use the Eldorado Gold (EGO) example from the video. Imagine you see a Shakeout Demand Tail forming on EGO.

  • Buy Stop: You might set your buy stop at $17.47, which is the high of the Shakeout Demand Tail.
  • Stop-Loss: You might place your stop-loss at $17.17, just below the low of the Shakeout Demand Tail.
  • Risk: Your initial risk on the trade would be 30 cents (the difference between your entry price and your stop-loss price), or 1.72%.

Importance of Risk Management: 20-Day ADR Percentage

It's crucial to manage your risk. A useful tool is the 20-day Average Daily Range (ADR) percentage. This tells you the average daily range of the stock over the past 20 days.

You can use the 20-day ADR percentage to gauge your initial risk. Ideally, your risk should be half to two-thirds of the 20-day ADR percentage.

In the EGO example, the risk (1.72%) was less than the 20-day ADR (3.19%). That makes it a reasonable risk level.

Setting the Limit Price

The limit price is the maximum price you're willing to pay. It's typically set a quarter to half a percent above the prior session's high.

For EGO, setting the limit at 0.25% above the high of $17.47 would result in a limit price of approximately $17.51.

Benefits of the Buy Stop Limit Order

This order type offers several benefits:

  • It prevents you from buying too high if the stock gaps up significantly.
  • It allows you to enter the trade at a predetermined price.
  • It allows you to define your maximum risk with a stop-loss.

In the Eldorado Gold example, the stock gapped up, traded down, and then reversed. The buy stop limit order would have allowed you to enter the trade at a reasonable price and avoid getting caught in the gap.

 

Watch the video for this post:

 

Takeaway

The Shakeout Demand Tail is a powerful setup that can help you identify potential buying opportunities in the market. By understanding the key elements of the setup and using a buy stop limit order, you can increase your odds of success and manage your risk effectively.

For more insights, explore these resources:

Remember to always manage your risk and consult with a financial professional before making any investment decisions. Happy trading!