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What is the Moving Average Undercut & Rally (MAU&R) pattern?

Moving Average Undercut & Rally (MAU&R)

When a leading stock breaks below its moving average, a move back above the moving average can provide a long entry point as the stock moves back up through the line. Thus the term, "Moving Average Undercut & Rally." The stock essentially undercuts the moving average, faking out sellers and would-be short-sellers, and then rallies back above it. Once the buy signal is triggered, one then uses the moving average as a selling guide, and can adjust their stop to 1-2% below the line depending on risk-preference.  

The mechanics of this trade are similar to a regular Undercut & Rally (U&R) move where a stock undercuts a prior low in the pattern, usually along the lows of a potential new base, and then rallies back above that low, triggering a buy signal based on the U&R. The difference is, of course, that an MAU&R works on an undercut of and rally back through a moving average, while a straight U&R is simply an undercut of a prior low (price point) in the pattern and a rally back above that same low.
First published: 13 Jul 2017
Last updated: 13 Jul 2017