Wednesday, July 13, 2011

TCL failure

A channel is normally a flag and after 3 pushes or so will resume the prior move to at least test the original trend extreme. Any movement of the price outside the channel tends to push the price action to the other extreme of the channel (b29 to b34, b40 to b46). The more extreme the violation, the sharper the bounce.

Very deep excursions can result in a very sharp snapback especially if the price action early in the day  (b7-13) showed strength in the same direction. However, if this snapback fails to rush to the other extreme of the channel and instead gives a 2 legged move (b60-67), then we have a TCL failure and the result is often a measured move of the extent of the channel (met at b75). This acts like a fH1 and usually is one on a higher timeframe.

The correct trade is to take both the expected snapback and reverse on its failure since both are likely to move around the same number of points (b16 hi to b24 hi is the same as b66 low to b75 low)


  1. Hi Cad
    A couple of points that I need clarification on; first what does "This acts as a fH1 in on a higher time frame." means; second "(b16 hi to b24 hi is the same as b66 low to b75 low)" this does not seem to be so looking at your posted chart.
    Thanks for clarification, you can let me know in chat.

  2. Also on your chart I see a TT which according to BPA site means triple top but I only see a double top there. What am I missing?

    PS please take these two comments off after clarification since there won't be any need for them.

  3. Bijan, A 30m chart often shows this PA as a failed H1. You can see the horizontal lines showing 8.5 pts from b16 to b24 and b66 to b75.

    TT is trend termination caused here by double top. See glossary on this site

  4. Why is it ok here to take the 1Rev above a bear bar? What do you think about buying the close of bar 7 if 1Rev was not taken?

  5. Privateer, exceptions can be made for bar quality for 1Rev and 1PB setups because they often give exceptional results. But these exceptions should only be made as long as there are other additional signals such as TL support, ema, 5tf or any other reason to take the trade.

  6. privateer, Some traders would buy the close of b7, I personally would not, simply because the risk is the bottom of b7, I'd rather wait for any pullback such as b12 and buy its close. Another option is to buy pullbacks on a smaller timeframe such as 2min.

  7. Cad are you saying b24 hi to b60 hi is the same number of points to b66 lo to b75 lo? I think you may have gotten the bar numbers wrong as you state b16 and I think you should say b60 if I am understanding your post correctly.

  8. Cadaver,
    Another good post.

    In the case of 1Rev here, curious why you are buying 1 tick above the red bar without waiting for a green bar and buying above it?

    Since the trend was strong, would you not buy b29 which is G & FBO of b19 swing low?

    Not sure what is 5tf acronym?