Wednesday, June 22, 2011

Reversal of the extreme of the prior day as a trend generator

Days that open near the middle of the prior day's range are likely to be trading range days. If they test one of the extremes and reverse it, i.e., give a failed breakout of the High or Low of the previous day, its a potential trend generator.

Reversing the close of the prior day can sometimes result in a small move as today's open did, particularly as a continuation move of the overall trend of the prior day. However, the reversal of an extreme of the day, especially the second failed breakout is likely to attempt to take out the other extreme of the prior day.

When you see two failed breakouts of an extreme, its a very good swing trade for many points and you should always swing some contracts.

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