I've often spoken about how outside bars are trading ranges and are often fade candidates. I also mention oio reversals. How do you distinguish between a legitimate oio reversal and just a trading range bar?
There are several factors that may make an oio successful. For example prior strength, an overshoot, the two outside bars being of comparable length but the most important factors are the entry bar size and its low holding through pullbacks.
When the latter outside bar is large, the stop is too large and consequently many buyers will not enter, and those who do will use various money stops of 4t or 6t etc., in other words, these buyers are weak. If the entry bar is weak and its low is taken out as in b13 or gives a sell signal beyond its low as in b34, then its a high probability short.
If the entry bar is a strong trend bar as in b46 and its low cannot be taken out on multiple attempts, then the trend will terminate. A poor reversal signal b45 followed by a poor continuation signal at b51 is a sign of trend termination and one should be looking for breakouts into new trends at this point.
But until a trend terminates, oio failures are possibly your best bet to get into a hard trend move since they present such few opportunities to get in late if you missed the 1PB entries at b7 or b13.
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