RS Trader Academy

Schools / School V — The Trade / Course 1

Entry types

After this lesson you'll know the three entry types this Academy trades, and the test that separates an actionable stock from an extended one.

The three entries

Everything upstream (the stage, the base, the volume, the RS leadership) identifies which stocks deserve your money. This school is about when and how it actually changes hands. The entry comes in three basic types, each with its own trigger and its own stop logic.

The breakout. The stock clears the ceiling of a sound base (School III) on expanding volume. The trigger is precise, a tick above the base high, and the logic is Darvas and O'Neil's: demand proving itself at new prices is the confirmation you were waiting for. What that confirmation costs is an entry at the most visible price of the year, sometimes into a crowd. The stop lives back inside or below the structure that launched the move, and course 3 will place it properly.

The pullback. A confirmed Stage 2 leader retreats to a rising reference, the 21-day or 50-day average, or the top of the old base, and finds buyers there. You're entering an established trend at a discount to its recent high, with a naturally close stop just below the reference, which School II's division converts into a healthier position size. That closer stop has a price of its own. Pullbacks are moments of short-term weakness by definition, and some of them turn into the beginning of something worse. What triggers the entry is the reference holding, with price finding support there on declining and then reviving volume. The touch on its own doesn't qualify.

The reclaim. The sharpest of the three. A leader breaks a level or an average, in full view of everyone watching, and then within days powers back above it. The shakeout ran the stops, the weak holders are out, and the reclaim shows the size that was waiting underneath. The entry triggers on the recovery close back above the level. The stop goes under the shakeout low, which by then is the most honestly-tested level on the chart.

Actionable versus extended

Every one of these entries shares a disqualifier: extension. A stock 30% above its 50-day average may be the best company in the market and is still not an entry, and the reasoning is School II arithmetic rather than aesthetics. The nearest level where the trade's idea would be wrong sits so far below that sizing to 1R leaves you a token position, or tempts you into a tight stop with no structural meaning at all, placed inside the day-to-day noise (School III, course 6), which turns a good stock into a coin-flip trade.

So the standing test before any trigger: where's the stop, technically, and what does the division say? If the honest stop makes the position absurd, the stock is extended, and extended means waiting for the next base or the next pullback. Leaders in real advances offer entries repeatedly, so missing one costs a few percent at most. Forcing one costs more than that, because it spends the discipline everything else here is built on.

Check yourself

  1. Match the stop to the entry: breakout, pullback, reclaim. (Breakout: back inside/below the launching structure. Pullback: under the reference that held. Reclaim: under the shakeout low.)
  2. Why is the touch of the 50-day never itself a pullback trigger? (The touch is just arrival — some pullbacks keep falling. The trigger is evidence of the reference holding: support found, buyers reviving.)
  3. A leader is 35% above its 50-day. Apply the standing test. (Nearest honest stop is miles away; the division yields a token size or an indefensible stop. Extended — wait for the next proper entry.)

The habit this lesson installs

Before any trigger: where is the honest stop, and what does the division say?

Next: Course 2 — "The setup checklist."