Today’s thought begins with the only entry criterion in the ebook: help and resistance. From there, I layer on a couple of my go-to indicators to verify the sign earlier than pulling the set off. I’m BURL (Burlington Stores Inc.) . The inventory is down about 17% over the previous 17 days and has now slipped into a zone the place a mean reversion bounce might set up. If worth holds at help and the indications line up, this might supply a defined-risk shot to the upside. Support/resistance Note the white line on the chart — this marks a long-term help zone close to $248. Over the previous six months, worth has reacted to this stage a number of occasions on each bounces and fades. We’re again at that juncture now, and after tagging help, BURL is printing greater highs and better lows, suggesting a constructive flip off this space. MACD (shifting common convergence divergence) The MACD is a dependable reversal gauge. While the usual (12, 26, 9) settings are standard, they’ll lag, so I typically swap to (5, 13, 5) for a faster learn. On BURL, the MACD line (blue) has simply crossed above the sign line (yellow) — my first affirmation that momentum is popping in favor of the lengthy setup. RSI (relative energy index) RSI is a versatile momentum gauge that not solely flags overbought/oversold extremes (so you are not chasing) but in addition helps spot reversals. On BURL, RSI has snapped greater after nearing oversold territory—an early trace that momentum could also be turning again to the upside. (Like trades like these? My new algorithm is thrashing the benchmarks— see it in motion right here .) The commerce setup : BURL 260-265 bull name unfold To play BURL to the upside, I’m using a bull name unfold — outlined danger, outlined payoff. With BURL round $262, the setup is: purchase the $260 name and promote the $265 name as one unit. If BURL finishes at or above $265 by expiration, the unfold pays its full $5.00 worth—turning roughly a $2.50 debit into a 100% return. With 10 contracts, that is $2,500 in danger for a potential $2,500 achieve. If worth drifts a bit earlier than entry, I’ll nudge the strikes to maintain them bracketing spot so the chance/reward stays optimum. Here is my actual commerce setup: Buy $260 name, Oct. 31 expiry Sell $265 name, Oct. 31 expiry Cost: $250 Potential Profit: $250 — Nishant Pant Founder: https://tradewithmaya.com https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanDealer DISCLOSURES: Nishant has a BURL 260-265 Bull Call Spread expiring on Oct. 31. All opinions expressed by the CNBC Pro contributors are solely their opinions and don’t mirror the opinions of CNBC, NBC UNIVERSAL, their dad or mum firm or associates, and should have been beforehand disseminated by them on tv, radio, web or one other medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click right here for the total disclaimer.