Wednesday, June 29, 2011

Two legged pullback to ema on open

When the prior day had a strong trend move and the next day opens with a gap in the direction of yesterdays overall trend, any two legged move to the ema should be taken as a continuation signal. This is usually a good indication that at least the AM move will trend in the direction of yesterdays trend.

This signal is greatly enhanced if the last push of the previous day was in the direction of the trend and consisted of many average sized bars, especially a single leg move. If the pullback on open breaks below the close of yesterday and reverses (b7-9), this indicates a very strong signal. 

If you miss the actual reversal due to a bad signal bad (b8), you can always take the first minor pullback (b12) or the BP after a break above b1.

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