How a Trailing Stop on ASX Momentum Stocks Protects Against Overhead Resistance — and What to Do When the Stop-Out Gaps Up
Updated: Oct 10
Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | Updated October 2026
Analysis sourced from Gary Glover (AR 259215), Authorised Representative, Novus Capital Limited (AFSL 238 168)
A trailing stop loss tied to the 10-day or 20-day moving average protects a momentum trade in two directions at once: it raises the exit level as a leader tightens, locking in more of the gain every session, and it forces an exit before heavy overhead resistance drags a stock back down. Gary Glover, Authorised Representative of Novus Capital Limited (AFSL 238 168), who reviews ASX momentum stocks in a recorded weekly session with Finer Market Points, walked through both sides of that discipline in the 28 August 2026 session — a stock trapped under overhead resistance, a leader whose moving average stop kept climbing with it, and a live decision on a stop-out that gapped straight back up the next morning. The FMP Momentum Profile showed 62% of tradeable ASX companies trading above their 50-day moving average that week, with the quality of the leading names sitting better than 46% of prior observations — a "middle of the road" reading, in Christopher Hall's framing. This guide covers why overhead resistance traps some ASX momentum stocks and not others, what a trailing stop looks like when it is working, what to do when a stop-out gaps up the next morning, and how splitting a stop across two levels reduces the cost of getting whipsawed out.
Gary Glover and Christopher Hall review the ASX momentum leaders and take live member questions on stop discipline — recorded 28 August 2026.
Why Do ASX Momentum Stocks Fail at Overhead Resistance?
A stock carrying a lot of overhead supply attracts sellers on every rally, because holders who bought at higher prices are relieved to sell back to breakeven rather than hold on for a further gain. William O'Neil's research into base-building patterns, documented in How to Make Money in Stocks (2009), identifies this as a structural feature of institutional sponsorship: a sound base absorbs the supply left by an earlier decline before a stock can sustain a genuine advance. Where that supply has not yet been absorbed, every rally into it meets the same resistance again.
Christopher Hall put a name to the mechanism during the 28 August 2026 session, describing it as being like crabs in a bucket:
"If you've got everyone else underwater with you and the share price starts to take off, it's like crabs in a bucket. Just keep pulling any successes back down and bring it back down to earth. The ability for a crab to climb out of the bucket is significantly hindered because everyone else is a loser and pulling them back down." — Christopher Hall, 28 August 2026 FMP session
Gary Glover's anecdotal observation, developed across his trading career, was immediate agreement — and a direct application of the framing to the mechanism itself:
"I don't want to be trading with the crabs in the bucket." — Gary Glover, 28 August 2026 FMP session
Gary's broader explanation, offered in the same session, is that the proportion of holders sitting on a loss — not the proportion sitting on a gain — is what determines how hard a rally has to fight: "some of the other names that are closer to the highs got, you know, maybe eighty percent of the people who bought in the last year are all in front, so there's less anxiety over stock there — whereas a lot of stocks can be, say eighty percent of the people who bought it are underwater, then that's going to be hard to push through that resistance." A practitioner observation, not a formal study — a stock with more winners than losers in its recent buyer base carries structurally less overhead than one where most holders are still waiting to get back to even.
Bapcor (ASX: BAP) was Gary's live example. Coming from what he called "a position of weakness," BAP had spent three months building overhead the hard way — a trader who tried to buy it in June would still have been underwater by August. Gary's read: "this is the crab in the bucket — there's going to be everyone pulling you back down here. Don't be surprised to see this one jump up, and then when it pulls back it'll give up a lot of it back." He wants to see a real sign of strength — big, chunky volume and tight resistance on the way through — before trusting a breakout through heavy overhead, and BAP was not yet showing it.
The same session carried two contrasting cases — a stock with almost no overhead (CSL) and one with a live, unresolved overhead problem (BNZ) — worth setting side by side against BAP:
Stock | Position on the range | Overhead condition | Gary's read |
BAP (Bapcor) | Position of weakness, three months underwater | Heavy — many holders still below breakeven | Not showing the volume/tightness needed to trust a breakout yet |
CSL | Near its highs, tightening | Minimal — most recent buyers already in profit | "Still not showing any weakness" — an unusually tight consolidation for a blue chip |
BNZ (Benz Mining) | Extended, then tightened before the stop-out | Moderate — held key moving averages through most of the move | "Still in a position of strength" going into the 21 August stop-out |
A stock sitting in the bottom half of its 12-month range is carrying more of the sellers waiting above the price before a trader has even looked at the chart shape — which is why Gary Glover's top-half filter matters as much as the pattern itself. It is also why why laggards fail while leaders hold is a mechanism Gary has applied repeatedly across sectors, not just to BAP.
What Does a Trailing Stop Look Like When It's Working?
When a genuine leader tightens instead of running straight up, the moving average catches up to price — which raises the trailing stop every session and locks in more of the gain without a trader needing to guess a top. This is the mechanical reward for holding a stock that consolidates well rather than one that either runs too hard or breaks down. Mark Minervini, two-time U.S. Investing Champion and author of Trade Like a Stock Market Wizard (2013), identifies the underlying principle in the Volatility Contraction Pattern (VCP) he systematised:
"The key is not the absolute size of the contraction, but the progressive narrowing — each pullback must be smaller than the last to confirm supply is being absorbed." — Mark Minervini, Trade Like a Stock Market Wizard (2013)
CSL was Gary's example of this working as designed on the 28 August session. The stock had rallied, come back to test its 10-day moving average, run again, and come back to the ten a second time — each pullback holding, none of them breaking the average. "This is still not showing any weakness here so far," Gary observed, adding that the degree of tightness was "really abnormal to see for such a blue chip company." That abnormality is the point: a large, liquid stock consolidating this tightly gives the moving average time to close the distance to price. The same tightening mechanic, replicated across several stocks in a sector at once, is how a thematic cluster shows up on the chart before the group breaks out together.
Gary explained why that tightening matters for the mechanics of the stop itself:
"If you use the ten days as your moving average, and it gives up here, you're going to give up a lot of gains. But when you see it tighten up like this, that's good — the MA gets a chance to catch up. Which means your stops getting higher every day, which means you're locking in more profit." — Gary Glover, 28 August 2026 FMP session
The trader following a 10-day stop through a fast, uninterrupted run watches the gap between price and the moving average widen with every session — a large adverse move can give back weeks of gain in a single close below the average. A trader following the same stop through a tight, well-behaved consolidation like CSL's watches that gap close instead, so the stop is doing its intended job: protecting most of the move rather than most of the risk.
The FMP Momentum Profile — accessible to FMP YouTube Momentum Profile members — included relative-strength and breadth readings at the time of the 28 August 2026 session, giving members early access to the educational data discussed in this article.
What Should a Trader Do When a Stop-Out Gaps Up the Next Morning?
A gap-up through the whole prior day's range after a stop-out is not automatically a signal to chase — Gary's approach is to look for a lower-timeframe congestion entry instead of buying the big bar. BNZ (Benz Mining) supplied the live version of this decision during the 28 August 2026 session. The stock had tightened after an extended run, held its 20-day moving average through a shallow pullback, then produced a high-volume down day on 21 August 2026 — the kind of session that would trigger both a 20-day moving-average stop and an end-of-day rules-based exit. The next morning, BNZ gapped up through the whole of the prior day's range.
Christopher Hall put the scenario to Gary directly: if a trader had been stopped out on that 21 August session and then watched the stock open above the entire prior day's range, would he reverse the position, re-enter, or wait for a better setup? Gary's answer, trimmed to the substance:
"I probably wouldn't have entered that trade there — the fact that it tightened up, maybe zoom into the half-hourly, you could get a chart entry in that congestion. I'm looking for the whole thing to tighten up and then come through." — Gary Glover, 28 August 2026 FMP session
The reasoning behind that answer is worth stating plainly: buying the gap bar itself means entering without knowing where the risk-reward sits, because the stop and the entry price have not yet been defined against a fresh structure. Gary's alternative is to drop to a half-hourly chart and look for the gap-up session to congest into its own small consolidation — effectively a fresh, smaller-timeframe setup inside the bigger move — rather than chasing the size of the bar. This is not a failed trade; it is what the mechanical exit is supposed to do. Gary's own framing of the outcome: "that's sort of trading — sometimes it closes below the twenty, and if your rules say it closes below the twenty, you're out." A rules-based stop can be the correct decision even when the very next session makes it look wrong in hindsight, because the rule is priced across many trades, not judged by any single one.
Remember that past performance is no guarantee of future results, and all trading involves risk.
This is a different decision point from the one covered in Gary Glover's profit-taking framework — that piece addresses a trade that has run too far above its moving average, not a trade stopped out on a rules-based exit.
How Does Scaling a Stop Across Two Levels Reduce Whipsaw Risk?
Splitting a stop across two levels — for example, half at the moving average and half at the prior swing low — costs a trader only part of a position on a whipsaw instead of the whole position. Gary Glover's anecdotal approach, described in the same BNZ discussion, is not to use one fixed stop level at all:
"I usually break it up because I'm usually trying to scale into the stocks. I normally scale out. So hopefully if something like this happens, I still hold half or a third of my position." — Gary Glover, 28 August 2026 FMP session
Splitting a stop this way, in Gary's framing, works two ways at once:
Half at the moving average, half at the prior swing low. A whipsaw that closes below the moving average but holds above the prior swing low only costs the trader the first half of the position — the second half is still in the trade if the stock recovers, which is exactly what BNZ did the next morning.
The exit mirrors the entry. Gary's stated reason for scaling the stop is that he is typically scaling into the position in the first place — building it in stages rather than buying a single size all at once — so reducing it in stages on the way out is the same discipline applied in reverse, not a separate rule.
The members-session discussion of Andean Silver (ASL) supplied a working example of the scale-out half of that discipline on its own. Gary's anecdotal observation was that he sold approximately a quarter of his ASL position into strength around the fourth or fifth session after the stock's 5 August 2026 breakout — banking part of the gain into a run rather than trying to call the top of it. A shakeout day followed shortly after, briefly undercutting the stock's 10-day moving average before it recovered; because Gary had already taken partial profit, the pressure of deciding whether to hold through that shakeout was reduced. This reflects Gary's own trading activity as direct session commentary on his approach to position management — not a forward recommendation to trade ASL.
Update — 9 October 2026: Taking Half Off at the 10-Day and Half at the 20-Day
During a recorded Finer Market Points session on 9 October 2026, Gary Glover used Ansell (ASX: ANN) to show the same moving-average stop applied to a stock that had already run. Gary observed that ANN had come through its 50-day moving average, held it for a time, then run along the 10-day, held the 20-day through a tight consolidation, and was holding the 10-day again. His anecdotal observation is that a close below the 10-day would be his trigger to exit such a leader, and that once a stock is this extended he would probably be running the 20-day instead. On the scale-out, he described his preference as: "Maybe take some off on the 10. I like the idea of maybe taking half off from the 10, half off from the 20." The ladder sits alongside the swing-low split above and the wider approach to using moving averages to stay in winning trades.
Gary Glover's observation is anecdotal, general commentary from a recorded FMP session and is not a formal study, financial advice or a recommendation to trade Ansell or any other security.
Conclusion
Overhead resistance is a structural headwind built from underwater holders, not bad luck — the crabs-in-a-bucket pattern Christopher Hall named and Gary Glover applied directly to BAP. A tightening leader rewards a mechanical trailing stop rather than punishing it, which is what CSL's tight consolidation demonstrated on the 28 August session. A stop-out is not automatically a mistake, and a gap-up the next morning is not automatically a signal to chase — BNZ's stop-out and recovery is the live version of that discipline. Splitting a stop across two levels, the way Gary manages both BNZ and ASL, reduces the cost of being wrong without abandoning the rule altogether. Traders following this pattern set can watch for whether BNZ's tightening resolves into the half-hourly entry Gary described, and whether BAP eventually clears enough overhead to support a genuine breakout. The supporting Momentum Profile data from the 28 August 2026 session is accessible to FMP YouTube Momentum Profile members.
The analysis in this article draws on Gary Glover's recorded session and the FMP Momentum Profile data, which is published daily and accessible to FMP YouTube Momentum Profile members. Members receive early access to the educational data that forms the basis of articles like this one. The breadth and quality readings at the time of the 28 August 2026 session are available to members. For information on FMP YouTube Momentum Profile membership, visit the Finer Market Points membership page.
Frequently Asked Questions
What does "overhead resistance" mean in ASX momentum trading?
Overhead resistance refers to the supply of stock held by traders who bought at higher prices during an earlier decline and are still sitting on a loss. As price rallies back toward those levels, those holders tend to sell back to breakeven rather than hold for a further gain, which absorbs the advance and slows or stalls the rally. A stock with a lot of overhead resistance typically requires a stronger, higher-volume move to clear it than a stock with little overhead above current price.
Why do stocks with a lot of overhead supply sell off even when they show strength?
A rally into heavy overhead attracts selling specifically because it is a rally — holders who have waited to get back to breakeven are relieved to exit into the strength, not discouraged by it. Gary Glover's anecdotal observation is that this pattern repeats until enough of that supply has been absorbed, which is why a stock can show a genuine sign of strength and still give much of it back on the next pullback.
Should a trader use a 10-day or 20-day moving average as a trailing stop?
Gary Glover's anecdotal preference, developed across his trading career, is to hold the tighter 10-day moving average where a stock's trend allows it, since it locks in more of a gain as the stock tightens. Where a stock is more volatile or the trend is less clean, he tends to reference the 20-day instead, and in practice he often scales a stop across a moving average level and a prior swing low rather than using one fixed line for the whole position.
What should a trader do if stopped out and the stock gaps up the next day?
Gary Glover's approach is not to chase the gap bar itself, because its entry price and risk-reward have not yet been defined against a fresh structure. His preference is to drop to a lower timeframe — a half-hourly chart, in his 28 August 2026 example — and look for the gap-up session to congest into its own small consolidation, treating that as a fresh, smaller entry rather than buying the size of the move.
What is a tiered or scaled stop-loss, and how is it different from one fixed stop?
A tiered or scaled stop splits a position's exit across two or more levels — for example, half the position stopped at a moving average and the remaining half stopped at a prior swing low — instead of exiting the entire position at a single price. Gary Glover's anecdotal approach uses this because he typically scales into a position in stages; scaling the exit in the same way means a whipsaw at the first level costs only part of the position rather than all of it.
Does a trailing stop work the same way on a small-cap stock as it does on a blue-chip like CSL?
The mechanism is the same — the moving average still catches up to price during a genuine tightening — but how a moving-average stop reads differently on a small-cap breakout depends heavily on volume participation. A small-cap stock with thin volume behind its moves can whipsaw around a moving average more readily than a heavily traded blue chip like CSL, which is one reason Gary Glover favours scaling and splitting stops on names with less liquidity behind them.
Is a stop-out on a rules-based exit a mistake if the stock reverses immediately afterward?
Not on Gary Glover's framing. A mechanical stop is priced across many trades, not judged by the outcome of any single one — the 21 August 2026 stop-out on BNZ was consistent with the rule even though the stock gapped back up the next morning. Gary's anecdotal observation is that a rule which occasionally exits a trade too early is still doing its job if it is protecting capital on the trades that do not recover.
Sources
# | Source | Type |
1 | Gary Glover (AR 259215), Novus Capital. FMP Session, 28 August 2026 (public). | Practitioner session |
2 | Gary Glover (AR 259215), Novus Capital. FMP Session, 28 August 2026 (members). | Practitioner session |
3 | Christopher Hall, FMP. FMP Momentum Profile data, 28 August 2026. | FMP proprietary data |
4 | Mark Minervini. Trade Like a Stock Market Wizard (McGraw-Hill, 2013). | Published research |
5 | William O'Neil. How to Make Money in Stocks (McGraw-Hill, 2009). | Published research |
All Gary Glover observations in this article are anecdotal practitioner observations developed across his trading career — not formal studies.
Related Finer Market Points Educational Resources:
The Top Half of the Chart: Why Gary Glover Avoids ASX Stocks Trading in the Bottom Half of Their Range — Christopher Hall
How to Identify ASX Momentum Leaders: Why Beach Energy Failed While Paladin Rallied 40% — Christopher Hall
ASX VCP Clusters: How to Identify a Thematic Sister Company Breakout Signal — Christopher Hall
When ASX Momentum Breakouts Stop Working: Gary Glover's 50-Day Extension Rule — Christopher Hall
Breakout Volume Confirmation: What Gold, Software and Uranium Showed ASX Traders in August 2026 — Christopher Hall
This article includes a general trading observation made by Gary Glover (AR 259215), Authorised Representative of Novus Capital Limited (AFSL 238 168), during a recorded Finer Market Points session on 28 August 2026. The observation reflects Gary Glover's general approach and his anecdotal observations developed across his trading career — it is general commentary only, and is not a formal study, not financial advice, and not a recommendation to trade any security. It was made in the course of that session and not in response to any individual's circumstances. Content has been edited and summarised by Finer Market Points for educational purposes.
This content is for educational purposes only and does not constitute financial advice. Past performance is no guarantee of future results.
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