Methods and Reasons for Buying on Pullbacks

Whether in stocks or futures, a one-way price movement often includes temporary pullbacks. These pullbacks typically offer the best entry points for investors. Buying on pullbacks is a common strategy, with the following specific methods:

1. Volume-Based Confirmation
   During an uptrend, observe the trading volume during a pullback. A pullback with declining volume suggests the uptrend may continue, signaling a potential buy point. If volume spikes, check whether the price drop is due to institutional selling.

2. Technical-Level Entry
   Once a pullback is confirmed, use these methods to identify entry points:

   • (1) Buy at the Top of a Broken Trading Range
     If the price breaks out of a consolidation range (a "box" between support and resistance) with high volume but you miss the initial breakout, wait for the price to pull back to the top of the range (former resistance) without breaking below it to enter.

   • (2) Buy at Moving Average Support
     In a clear uptrend, buy when the price pulls back to key moving averages (e.g., 30-day or 60-day MA) without breaking below them on low volume. For deep pullbacks, the annual moving average (e.g., 200-day MA) may serve as the ideal support. A long lower shadow candlestick at support is a bullish signal.

   • (3) Buy at the Median Line of the Gann Extreme Reverse Channel
     In an uptrend, the median line ("lifeline") of the Gann Extreme Reverse Channel acts as a dynamic support level. A bounce off this line confirms a buying opportunity.

Reasons for Buying on Pullbacks

1. Institutional Strategy
   During rapid rallies, heavy selling pressure from trapped or profit-taking positions often forces institutions to temporarily retreat. They sell partial holdings to lower costs, lure retail buyers, and resume the uptrend after absorbing overhead supply.

2. Shakeout of Weak Holders
   Excess floating supply can hinder further upside. Institutions may engineer a fake "sell-off" to panic retail investors into selling low, allowing them to accumulate shares cheaply before resuming the rally.