Trading The 20 is just a reference to trading the 20 day moving average. It's also the chart setup I refer to when explaining Spot Light Stocks within the Daily Break Out Lists.

For discussion purposes I am referencing everything for a Long Trade, but this same method in reverse works equally as well with Short Selling.    

My Set Up: I look at a daily two year chart. I want to know where the chart has been in relation to where it is today. Is this a new high or new low or retracing from a low Etc. From there I use a 9 month chart with the 20, 100, and 200 Day Moving Averages as well as 10-3 Slow Stochastic and On Balance Volume.

I am looking for a Chart Pattern Break Out that corresponds with a higher low on the 20 day moving average and an increase in volume. The entire screen or buy point is based on the 20 day moving average. That Is Your Entry Point.

I want to see a surge in volume on the Break Out with Stochastic and OBV On Balance Volume confirming the Break Out.

At this point: A decision can be made based the Chart Pattern Breakout Star Quality my other Technical Indicators. Use the two predicted prices as targets and based on the criteria you can decide if the Risk to Reward is enough to trade on? If in doubt you can always start a watch list or paper trade the breakout. 

Stop Loss Order: As you can see when you are right the stock will take off to higher prices. When you are wrong you need to get out....period! I have found that the best place for a Stop Order on this type of trading is from $0.01 to $0.05 below the low of the break out bar.    

If you apply this method to the Top 5 Lists using a 2 year chart for reference and a 9 month chart with the 20, 100, and 200 day moving averages, Stochastic and On Balance Volume to confirm or deny a buy signal you will greatly improve your success rate.

The following two stocks were breaking out of Triangle Patterns, but the scenario plays out over and over again with all the Chart Patterns.  

Charts Courtesy of www.prophet.net