The Daily 20 SMA as Intraday Context: Base Breakouts and Failed Breakdowns

Video: The ONLY 20SMA Strategy I Used To Make $31,997/Month Day Trading
Creator: Emmanuel Malyarovich
Original Video: Watch the original video
Difficulty: Intermediate

The Big Idea

A moving average on the daily chart can help organize an intraday decision. The useful idea is not to buy every touch of a line. It is to identify a larger reference, inspect how price behaves there on a smaller chart, and define the point where the local setup fails.

If you remember one thing: the daily average supplies location; the intraday pattern supplies timing and risk.

Two Uses of the Same Average

The source first describes the familiar trend use of the 20 SMA: pullbacks toward a rising average can help locate potential long opportunities, while retracements toward a falling average can help locate shorts. It then emphasizes a different application: treating the daily 20 SMA as a reference area while evaluating a smaller-timeframe base breakout or failed breakdown.

These uses can overlap without being identical. A daily average may still be declining when an intraday rally approaches it. That creates a decision area, not an already confirmed daily uptrend. The smaller chart may show a clean break, repeated rejection, or a false move through the level.

The source’s reported earnings and return figures are not independently established by the supplied transcript. Nor do the selected examples establish that simplicity makes an indicator effective. The educational value lies in the decision structure, which can be specified and reviewed without adopting an income claim.

The Daily SMA and the Chart SMA Are Different Objects

A 20-period SMA averages twenty closing prices. On a daily chart those observations are daily closes; on a fifteen-minute chart they are fifteen-minute closes. A chart-period average cannot substitute for the daily reference just because both inputs say twenty.

There is another distinction: today’s developing daily SMA changes as the current daily close changes. Yesterday’s completed daily SMA is fixed until the next daily update. Both can be displayed, but they answer different questions. A historical signal must not use today’s final daily value before the day has ended.

The indicator below deliberately uses the previous completed regular-session daily SMA. This adds a known delay relative to a live developing average, while keeping the historical information set honest. It is a stated implementation choice rather than an exact reproduction of every chart shown in the source.

Three Ways Price Can Respond

Confluence with an old high or another average may make the area easier to identify. It does not make each reference independent evidence. Several price-derived averages can summarize much of the same data, so counting three lines as three unrelated confirmations exaggerates the information.

Worked Example: Choose the Stop Before Choosing the Size

Suppose the known daily SMA sits at $40.50. An intraday base spans $40.30–$40.58 and price confirms above it at $40.62. A stop beneath the base at $40.28 creates $0.34 planned risk per share. If the next relevant daily obstacle is $41.30, the available $0.68 offers 2R before costs.

A tighter stop at $40.48 risks only $0.14 per share, but it also tests a different thesis: holding near the average rather than holding the whole base. It may be stopped during an ordinary retest that leaves the base intact. You cannot compare the two stop choices solely by which produces the larger advertised R multiple.

With a $68 price-risk budget, the base stop permits 200 shares before costs. The tighter stop would permit roughly 485 whole shares under a simple division, greatly increasing exposure. The appropriate order quantity still depends on affordability, spread, slippage, and the instrument’s trading rules.

A Reclaim Is More Informative Than a Touch

The source’s failed-breakdown example combines repeated tests near a daily reference with lower tails and recovery. The observable fact is that attempts below the level did not hold at those times. It does not reveal the identity or intentions of the buyers.

A touch merely means the price traded at the reference. A reclaim requires price to finish back on the desired side under a stated rule. The extra information comes with a timing cost: the eventual entry may be farther from the low. That tradeoff should be measured rather than assumed beneficial.

Screening Is a Separate Task

The source looks for premarket movement and participation, then studies selected stocks. A large premarket percentage move does not by itself verify a catalyst or adequate liquidity. News, float, spread, and event risks need separate checks. This indicator operates only on the loaded symbol and does not replicate a market-wide scanner.

Also avoid interpreting a flat SMA as proof of low volume. Flatness describes a price average’s rate of change. Heavy two-sided trading can leave an average flat. Examine the volume data directly if participation is part of the plan.

Pine Script Indicator

//@version=6
// Guide: https://candlechasers.com/daily-twenty-sma-intraday-break-reclaim/
// Original educational indicator, not an exact reconstruction or a trading system.
indicator("CC Confirmed Daily SMA Context", overlay=true, max_labels_count=100)
if not timeframe.isintraday
    runtime.error("Use an intraday chart; the daily SMA is a higher-timeframe reference.")
length = input.int(20, "Daily SMA length", minval=2)
baseBars = input.int(5, "Intraday base lookback", minval=2)
maxBaseATR = input.float(3.0, "Maximum base height in prior ATR", minval=0.1)
useEMA = input.bool(false, "Require reclaim above chart 9 EMA")
regular = ticker.new(syminfo.prefix, syminfo.ticker, session.regular)
dailyMA = request.security(regular, "D", ta.sma(close, length)[1], lookahead=barmerge.lookahead_on)
ema = ta.ema(close, 9)
atr = ta.atr(14)
baseHigh = ta.highest(high, baseBars)[1]
baseLow = ta.lowest(low, baseBars)[1]
compact = baseHigh - baseLow <= atr[1] * maxBaseATR
// Compare both chart closes to the same known daily level.
breakout = barstate.isconfirmed and compact and close > baseHigh and close > dailyMA and close[1] <= dailyMA
reclaim = barstate.isconfirmed and low < dailyMA and close > dailyMA and close > open and (not useEMA or close > ema)
plot(dailyMA, "Prior completed daily SMA", color=color.blue, style=plot.style_stepline, linewidth=2)
plot(ema, "Chart 9 EMA", color=color.orange)
plot(baseHigh, "Prior intraday base high", color=color.new(color.gray, 40))
plot(baseLow, "Prior intraday base low", color=color.new(color.gray, 40))
plotshape(breakout, title="Base and daily-level break", style=shape.triangleup, location=location.belowbar, color=color.lime)
plotshape(reclaim, title="Daily-level reclaim", style=shape.circle, location=location.belowbar, color=color.aqua, size=size.tiny)
alertcondition(breakout, "Daily SMA base break", "CC: confirmed daily-reference base break on {{ticker}} {{interval}}.")
alertcondition(reclaim, "Daily SMA reclaim", "CC: confirmed reclaim of prior daily SMA on {{ticker}} {{interval}}.")
var table status = table.new(position.top_right, 1, 2, bgcolor=color.new(color.black, 15))
if barstate.islast
    table.cell(status, 0, 0, "Known daily SMA: " + str.tostring(dailyMA, format.mintick), text_color=color.white)
    table.cell(status, 0, 1, compact ? "Prior base passes width rule" : "Prior base too wide / warming up", text_color=color.white)

What This Indicator Shows

The blue stepped line is the previous completed regular-session daily SMA, with an orange chart-period 9 EMA. Green triangles require a compact prior-bar base, a close above that base, and a cross above the known daily reference. Aqua circles show a bullish candle that dipped below and closed back above the daily reference. Requiring the reclaim above the 9 EMA is optional and off by default.

Five base bars and a maximum three-ATR base height are our mechanical definitions. The breakout condition requires the preceding close to be at or below the same daily reference, so a later breakout far above it is not classified as a fresh daily-level crossing. Multiple separate reclaim candles can each be marked.

What This Indicator Does Not Show

The code does not reproduce a developing daily average, verify news, assess relative volume, or infer institutional involvement. It does not plot the source’s full set of hourly and intraday 200-period averages. Gray base boundaries are rolling references, not frozen orders or price targets. An alert identifies a completed pattern, not a filled trade.

Chart Setup, Alerts, and Validation

Paste the complete script into Pine Editor, save it, and add it to a standard-candlestick chart. Follow the timeframe and session instructions above. Configure alerts for the named condition using Once Per Bar Close. The code gates setup markers on completed chart bars; developing reference plots can still move while the current bar forms.

Allow enough history for every lookback and any higher-timeframe calculation. Inspect the visible references and status table before concluding that a quiet chart is broken. A restrictive filter can correctly produce no signals. Changing the chart session, timeframe, inputs, or available data can change the observations; create new alerts after such changes.

Validation status: code, state handling, confirmation timing, and HTML preservation were reviewed statically. The indicator has not been compiled or chart-tested in TradingView here, and alerts and browser copying have not been tested live. No orders, fills, backtest results, or performance claims are produced.

Practice and Research

1. Daily context: manually compare base breakouts near the known daily reference with otherwise similar breakouts away from it. Mark the sample before reviewing outcomes.
2. Response versus touch: log every test of the reference and distinguish a simple touch from a completed reclaim. Record the later entry price as well as any improved selectivity.
3. Stop thesis: on a separate worksheet compare base invalidation with reference-line invalidation, keeping entry timing unchanged. Record risk distance, affordable size, and spread sensitivity.

Review later sessions with the same definitions. Do not infer performance from how neatly the average fits a handful of large historical moves.

Check Your Understanding

Is a daily 20 SMA the same as a fifteen-minute 20 SMA? No. The observations being averaged differ.

Does a flat SMA prove low volume? No. It describes price behavior, not transaction count.

Replay task: mark the known daily reference before the session and record whether each approach breaks, rejects, or reclaims it, with no outcome-based relabeling.

Final Takeaway

Use a larger-timeframe average as a decision area, then require an explicit smaller-timeframe pattern. Keep the daily data timing, local invalidation, and available reward separate.

Risk Disclosure

This material is for education and research, not personalized financial advice or a recommendation to trade any security, contract, or account program. Trading can result in substantial losses. Leveraged products can produce losses beyond the amount initially committed, and short selling can involve unlimited loss. Options carry exercise, assignment, liquidity, and expiration risks. Stops and displayed prices do not guarantee execution; gaps, spreads, slippage, fees, funding, halts, and platform interruptions can materially change outcomes. Hypothetical examples, historical charts, indicators, and creator-reported results do not establish future performance. Understand the instrument, account rules, and total exposure, practice before committing capital, and use only risk capital you can afford to lose.

CandleChasers provides independent educational analysis and is not affiliated with, endorsed by, or sponsored by the source creator, platforms, or firms discussed.