Larry Tentarelli trades large-cap stocks with a 3-to-12 month holding period, using no indicators except price structure and moving averages. When he recorded this episode in October 2021, he was sitting on more than 40% cash — the highest since April-May 2020 — because the S&P had broken below its 50-day moving average with a big gap down, the 20-day had crossed the 50-day to the downside, and price was making consistent lower lows. He was not predicting a bear market. He was reacting to what the price trend was showing. This episode covers exactly how he makes those decisions.
Larry has been trading actively since 1998 and spent his early career as a broker with Merrill Lynch. He focuses on large institutional names — Apple, Microsoft, Tesla, Bank of America — because liquidity allows clean entries and exits. His website is bluechipdaily.com.
Watch the full episode below, then read on for the complete breakdown.
The core framework: price trend over everything
Larry’s primary signal is price structure. Higher highs and higher lows with rising moving averages means full-speed-ahead positioning. Lower highs and lower lows with moving averages rolling over means defensive positioning. That is the whole framework.
He does not use traditional indicators as buy or sell signals. His reasoning is straightforward: every indicator is a derivative of price. Relative strength can be overbought while a stock keeps climbing. It can be oversold while a stock drops through the floor. Price itself is more consistent than any calculation derived from it.
Moving averages sit at the center of his approach, but not as crossover signals. He looks at price relative to the moving average, and whether the moving average is rising, falling, or flat. The 50-day is his primary reference for trend health. The 20-day is his first warning signal. The 200-day defines the long-term picture. He uses 20, 50, 100, and 200-day moving averages across his charts.
Why moving averages rather than chart patterns? Because they remove subjectivity. One trader sees a double top. Another sees a V-bottom. But price is either above the moving average or below it. The moving average is either rising or it is not. There is nothing to interpret.
Range expansion as an early warning signal
Before price breaks a key moving average, Larry watches the daily range of individual bars. Small red bars on a daily chart do not concern him. Normal volatility in an uptrend does not change his positioning. What makes him more cautious is range expansion to the downside — a large red bar that is noticeably wider than the bars preceding it.
The same signal works in the other direction. A large range expansion to the upside on above-average volume is one of the signals he watches for when looking for potential reversal confirmation. His quantified threshold: 150% of average daily volume combined with a one-to-two ATR move.
This distinction — small bars as noise, large bars as signal — is validated through years of live trading and ATR work. It is not a system rule in the traditional sense. It is a filter for how much attention to give a given day’s price action.
The index gates everything
Larry makes a clear distinction between his behavior when the broad index is in an uptrend and when it is weakening. When the S&P is trending higher, he focuses primarily on individual stock charts and pushes hard on the long side. When the index breaks below key moving averages and starts making lower lows, he becomes defensive across the board — even if a specific stock looks like it is breaking out.
The logic is that a falling index pulls down most stocks, even ones with strong individual charts. Buying a stock breakout into a weakening index means swimming against a strong current. He would rather wait for the index to stabilize and confirm before committing capital to new positions.
When he recorded this episode, the S&P had just broken below the 50-day with a gap down, the 20-day crossed below the 50-day, and prices were making lower lows. His cash position moved from a typical 5-10% to over 40%. He was not predicting a crash. He was reacting to what the structure was telling him.
Sector analysis as a secondary filter
Sectors account for roughly half of Larry’s decision-making when the broad market is weakening. His approach: always prefer a strong stock in a strong sector over a strong stock in a weak sector.
In October 2021, when the broader S&P and NASDAQ were rolling over, the energy sector was breaking out. Devon Energy was one of the strongest large-cap stocks in the market over a three-week window. He took that position because the stock and the sector were aligned. Alcoa had a reasonable chart in isolation, but the industrial metals sector was sitting at the 200-day — a weak sector. If two stocks compete for allocation and one is in a strong sector, the strong-sector stock wins.
He also monitors relative strength across sectors using screeners to identify where institutional rotation is occurring. When the market is weak overall, running a relative strength screener surfaces the sectors and stocks that are resisting the selling pressure. Those are where the tradable opportunities exist.
Stop placement and the rule about never widening
Larry uses trend following stops based on volatility: typically 10-12-15% from entry depending on the stock’s historical range, then trailed upward as the position moves in his favor. All stops are hard stops, entered in the system at the time he takes the position.
He has one strict rule: he will never extend a stop to give a position more room. He will sometimes shorten a stop if market conditions deteriorate, but the maximum risk on any trade is set at entry. When conditions deteriorate, he exits before the stop is hit. The Regeneron example from the episode illustrates this: his stop was well below where he closed out, but when the stock broke through its 50-day moving average during a period when the overall market was weakening, he cut the position immediately rather than waiting for the stop to fire.
Position sizing: he takes his full intended position at entry rather than scaling in. His experience with scaling in produced a pattern he wanted to avoid — stock moves 5% in his favor, he adds, stock pulls back 10%, and a good trade becomes a losing trade. He does scale out on the upside, selling 20-25% of the position to lock in some gains while leaving the majority running for the larger potential move.
Bear market playbook: 2020 as a case study
Larry reached 100% cash by mid-March 2020 as the market collapsed. His re-entry was methodical. He took a test buy — approximately 8% of capital in the technology ETF XLK, the strongest chart on his screen at the time. If the test buy works and the market starts moving higher, he commits more capital. If it fails, he stops.
The XLK position started working. He bought Microsoft. Then he staggered back into the market gradually over roughly 90 days. He did not go all-in at any point during that re-entry period because the conditions remained uncertain. He was responding to what the chart was confirming, not predicting when the bottom had arrived.
In a bear market, he does not go heavily short. His primary approach is to hold cash and wait for uptrends to emerge somewhere. In 2020, he avoided shorting because the market moved too fast. He notes that in a genuine bear market, treasuries often trend higher, and inverse ETFs begin forming uptrends. His process applies equally: wait for uptrends in those instruments and trade them long.
The McClellan Oscillator as context, not a trigger
Larry uses the McClellan Oscillator (NYMO) as a background indicator for potential reversal setups. When NYMO reaches the negative-50 to negative-60 range on the NYSE, it often marks a short-term reversal higher. He does not use it as a buy signal. He uses it to note that conditions may be getting stretched, then waits for price confirmation — a big move higher on above-average volume — before acting.
He is direct that the McClellan Oscillator is not necessarily better than TICK or other market internals. He uses it because he has consistent experience with it and understands how it behaves. His general view: any indicator can work if you use it consistently enough to develop real understanding of its behavior in different conditions.
Related episodes
- Entries, exits and trend following with Larry Tentarelli (first appearance)
- Breaking the rules for higher returns with Scott Welsh
- Overcoming broken strategies with Marsten Parker
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