The 200-period SMA on the daily chart is the most-watched long-term support/resistance level in equities. Bounces off a rising 200-SMA in a long-term uptrend are among the highest-probability swing setups available.
Indicators Used
SMA 200RSIVolume
Rules
📈 Long Bounce Entry
- Daily SMA 200 must be sloping upward (long-term uptrend)
- Price has been above SMA 200 for at least 3 months
- Pullback touches or slightly penetrates SMA 200
- RSI(14) between 30-40 (oversold but not extreme)
- Volume above 20-day average on the touch day
- Enter long on bullish reversal candle close
- Stop: 3-5% below SMA 200
- Target: prior high, or trailing stop at 50-SMA
⚙️ Configuration
- // 200-SMA Bounce Config
- SMA period: 200 daily
- Trend requirement: > 3 months above
- RSI zone: 30-40 (oversold for uptrend)
- Volume filter: > 20-day average
200-day
SMA Period
3:1
R:R
💡 Pro Tip
The 200-SMA is self-fulfilling. Institutions use it as a bias indicator. Bounces work because funds reallocate. BUT if the SMA is flat or declining, bounces fail. The entire thesis requires an established long-term uptrend.