Oliver Kell’s EMA strategy, known as the Cycle of Price Action

 

Oliver Kell

’s EMA strategy, known as the Cycle of Price Action, is a momentum-based trading framework built primarily around the 10-day and 20-day exponential moving averages (EMAs). Kell famously used this approach to achieve a 941% return in the 2020 US Investing Championship. 

Core Moving Averages

• 10-day EMA (Fast): Acts as the primary guide for short-term momentum and initial price support during strong trends.
• 20-day EMA (Slow): Serves as a "rising floor" and the secondary level of support for intermediate-term trends.
• 50 & 200 SMAs: Used as longer-term filters to ensure the overall trend alignment matches institutional buying patterns. 

Key Strategy Setups

1. Wedge Pop: The initial breakout signal where the price snaps back above both the 10 and 20 EMAs on high volume after a period of downward sloping averages.
2. EMA Crossback: The first pullback to the 10 or 20 EMA after a Wedge Pop. This is considered a low-risk entry point as the averages begin to "stack" and act as support.
3. Base n' Break: Occurs when a stock consolidates sideways near the EMAs for 3–5 days (forming flags or pennants) before breaking out again on volume expansion.
4. Exhaustion Extension: A signal to take profits or get defensive when the price becomes significantly extended (vertically far) from the 10-day EMA. 

Rules for Execution

• Directional Bias: Stay aggressive when the price is supported above rising EMAs and defensive when resisted by declining ones.
• Risk Management: Position sizes are typically kept small (1–2% total capital risk per trade), with hard stop-losses often set below the 10-day EMA or recent consolidation lows.
• Sell Signals: A primary exit trigger is a Trend Break, which occurs when the price closes below both the 10 and 20 EMAs after a sustained uptrend. 

Learn more about Oliver Kell's cycle of price action and specific EMA entry setups through these detailed breakdowns: