Tuesday, July 5, 2011

2 legged pullbacks in a trading range

On a trading range day, there are no A2 setups, but a 2 legged pullback after a possible test and reversal near the extreme of the range can often work like one. For example, After a possible breakout and reversal on b20, there were two failed attempts to sell at b24 and b27. When they failed, it is equivalent to a 2 legged pullback and the price should be expected to continue in the new direction.

The pullback after b62 DB and possible reversal was a bit more clear since b63 was an L1 and b66 was an L2. Similarly b5,7 were two failed attempts to sell and so were b77 and b79.

When the Trading Range is large enough, an attempt to fade the breakout becomes attractive. A good rule of thumb is to take fBO trades when the trading range is at least 4 points wide.


  1. Can you please explain the reasoning and details behind your fBO trade at bar 54? After so much bull strength, how did you know a large countertrend move was likely?

    Thanks Cad!

  2. Eumaeus,

    b52 was a breakout attempt above the TR and HOD that failed, hence, fBO

  3. Hi Cadaver, just came across this blog which is great. I recently bought Al Brooks's book on price action and am trying learn. I am confused sometimes when Al talks about H2s in an up trend and the bar is not above the previous bar could you give me some help on the true definition of H1, H2, L1, L2. Thanks Paul

  4. Paul, its best to not worry about H2 and L2 and focus on 2 legged pullbacks. Over time, you will be able to interpret them as H2/L2 properly, but the most important pattern recognition in real time is 1) its a trend and 2) its a 2 legged pb