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  • Writer's pictureTrader Stewie

Swing Trading the Holy Grail Setup

Hi folks,

2023 has so far proven to be a strong year for stocks. We have witnessed some new emerging trends and the tech space regain strength in a meaningful manner! $NVDA, $TSLA, $NFLX, $AMD, $MSFT and countless other stocks have been flexing their strength and have been steadily trending and trading higher!

When a new trend emerges in the market or the market gains strength out of a bearish period (2022 for example) sometimes it can be hard to switch gears and get back into the trend without feeling like you may be chasing a stock higher and higher. As a trader you know that the path of least resistance is usually the smartest path to take!

So how does the "Holy Grail Setup" tie into all of this?

The Holy Grail Setup can help you slide into a trend in a controlled manner. In short you're waiting for a meaningful pullback to get yourself into a trend and potentially follow it higher with this setup. In this post today I'm going to give a detailed step-by-step breakdown as to how you can use this setup and potentially create more meaningful and confident trades in a trending market!

What is the Holy Grail Setup?

The holy Grail Setup was a setup first mentioned by Linda Raschke in her famous trading book "Street Smarts".

For my strategy, I use the basic idea of Linda's "Holy Grail" strategy which is buying strongly up-trending stocks on their first (or second) pullbacks to their 20 Day MAs. I use the 20-day EMA. I use my 'Power Earnings Gappers'(PEG) watchlist to help spot these setups. Some stocks get very overbought and too extended to buy, so I simply wait, and wait, to see if the stock will pullback. Ideally, I want to see it pullback in what like to call a "SMART PULLBACK".

A "smart pullback" is basically a slow and steady low volume, multi-day pullback to test the 20 Day MA it has to be the first or second time it tests the 20 Day MA post the 'Power Earnings Gap' day. That's important because we don't want to buy the 3rd, 4th or 5th retest of the 20 DAY MA due to the fact that, the odds of it bouncing every single time off the 20 Day MA, is very rare!

So, from a purely technical point of view what qualifies a Holy Grail Setup?

Ideally on a daily timeframe chart (Although it is applicable to shorter and longer time frames)

The Holy Grail Setup is a trading technique that uses strongly trending (in this case bullish) stocks, that first pullback to their 20 Day Exponential Moving Average, losing the moving average intra-day and then reclaiming and closing back above that moving average in the same day! Often forming a hammer candle or something similar.

The Holy Grail Setup Technicals:

How do I manage risk on a trade like this?

Once you encounter a qualifying "Holy Grail" setup you can use the price points on the "Holy Grail" setup candle to help guide you through the trade. Ideally your stop loss should be slightly below the Holy Grail setup low from the previous day. If its a swing trade give the trade a few percentage points (or less) to breath. You do not want to see the stock close below the holy grail setup low. This would disqualify the setup at that point.

Could you show me recent examples of a "Holy Grail" setup in this 2023 market?

Yes, here are 3 recent Holy Grail setup examples:

$ORCL Holy Grail Setup:

  • Strong trending stock above 20 EMA

  • Recent Power Earnings Gap that continued higher

  • Meaningful pullback into 20 EMA (With a falling wedge formation)

  • Holy Grail Setup Candle

$SMCI Holy Grail Setup:

  • 2 meaningful and powerful Power Earnings Gaps back to back!

  • Strong trend above 20 EMA

  • Recent wedging formation that pulled back into 20 EMA

  • Consolidation around 20 EMA followed by a Holy Grail setup!

  • Continuation of the trend higher out of the Holy Grail setup

$PLTR Holy Grail Setup:

  • Power Earnings Gap triggering a strong trend back above the 20 EMA

  • Meaningful pullback in the trend back into the 20 EMA

  • Multi-day consolidation and the a Holy Grail setup trigger

  • Trend resumes higher out of Holy Grail Setup!

How does a setup like this form? What does it usually trade like?

I have a video to help visualize that!

I hope this step-by-step educational post will help you add another powerful tool to your trading arsenal! Thanks for taking the time to check it out!

Be sure to check out the Art of Trading Blog ( ) and all that it has to offer! I've created an extensive catalog of real world trading techniques, strategies and reviews such as this one! The free educational content can add a lot to your trading tool box and make you a more confident trader!


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