There is only one way to trade in a long-term uptrend: long. Forget about picking tops and breaks below short-term moving averages. Leaning bearish within a long-term uptrend is not a profitable strategy. Instead, we should lean bullish and use oversold conditions to our advantage. In a long-term uptrend, I am only interested in oversold conditions because these provide setups to trade in the direction of the bigger trend. I ignore overbought conditions because it is normal to become overbought in an uptrend. Oversold conditions, on the other hand, occur after a pullback and this is an opportunity to partake in the long-term uptrend. The chart below shows SPY with two momentum oscillators: RSI(10) and %B(20,2). I am using both to identify oversold conditions in a long-term uptrend. SPY is well above its rising 200-day SMA (blue line) so the long-term trend is clearly up. %B tells us the location…
