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Undercut and Rally Setup Explained in Swing Trading

Most traders get stopped out right before the biggest move of the year.

They watch the stock flush below a key level, hit their stop, and then stare at the screen as price immediately reverses and runs 30%, 40%, 50% without them.

It feels like the market is personally targeting you.

The truth is, it kind of is.

And today I am going to show you exactly how to be on the right side of that move.

The setup is called the Undercut and Rally (U&R), and it has made me tens of thousands of dollars.

One of the trades was NVDA.

NVDA had been trending beautifully, then pulled back hard through the 20 SMA. Every holder who had their stop just below that moving average got flushed out in a single session.

I had marked the level the night before.

I waited for the reclaim. I entered.

The stock ran over 20% in the following two weeks without ever looking back.

That one trade paid for months of losses.

That is the power of understanding what is actually happening beneath the surface of price action.

What Is the Undercut and Rally?

In simple terms, the Undercut and Rally is a failed breakdown.

It is a classic shakeout where price dips below a major key level, shakes out the weak holders by hitting their stop losses, and then snaps back above that same level with strength, typically confirmed by volume.

This setup most commonly a...

Takeaway

A long X post teaching the undercut-and-rally setup: a leader dips under a watched level (the 20- or 50-day, a prior high-volume close), runs the stops under it, and closes back above within one or two sessions on volume; buy the reclaim, stop under the undercut low, at least 3:1. It is the classic Wyckoff spring with no backtest behind it; the examples (NVDA, MU, BE, NBIS) are winners picked after the fact. Filed to the concept library as undercut-and-rally (folk, proposed).