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.