Tuesday, July 12, 2011

A Wedge reversal of a weak trend may generate a strong trend

Often trading range days are weak trends with deep pullbacks. The price continues to make higher highs (b11,b28, b59) and higher lows (b17, b22, b49) etc. When such a trend has a Wedge reversal (W11,28,59), there is a good chance it will reverse the entire wedge. A strong breakout (b55-58) from an essentially horizontal movement on failure will produce a large move down. The reason for this is simple: The horizontal movement acts like BW and the breakout like a BW fBO.

The most important reason however, is that every new breakout on a trading range day that did not open with a large gap is far more likely to fail than to succeed.


  1. Hey Cad,

    What are you thoughts about going long 1t above b12? I took the trade, got out BE.

    I thought it looked like an A2.

  2. b9 & b13 are L1 & L2. b10 is h1 and b13 is h2. Only problem taking a long in that area is its in a tight range. So better to wait for a BO. B19 long can also be thought of as BW FBO as well as G.

    Curious why you didn't short the b28 bar for FBO after 3 pushes?