A short trading-transcript excerpt describing a simple trade entry model: during sideways consolidation the market forms higher lows (a tightening wedge), and an effective entry is the 'undercut and rally' where price briefly undercuts a prior low then rallies. The speaker also mentions averaging cost basis and adding on a breakout (example: average cost $16, adding at $20).
Before you get a flat based breakout, you'll have like this sideways consolidation. And every one of these little oscillations, they might be what's called a higher low. So every time it comes down, it can't come down quite as far. So people build like a tightening wedge. Yeah, well, sometimes what ends up happening is you'll get this sideways consolidation, and as it's building higher lows. Let's just say you had a low like down here. What will happen is sometimes price comes back to that level, undercuts it, rallies, and sometimes. This is one of my favorite entries. This is called an undercut and rally. And then what becomes an add on entry is once this thing oscillates some more, so you've got an average cost basis at 16 bucks, and then all of a sudden you're adding at 20 on the breakout.
