Monday, August 15, 2011

Failed breakouts and Breakout pullbacks



On a trading range day, a failed breakout such as b26 may be traded if the signal is strong. I often pass up the setup if the move I'm fading is channel like and wait for 2 failed attempts to continue the move first (b30,32). This is because the first attempt to fade the channel will usually fail.

On the other hand if the breakout gives a poor signal bar (b60) or does not trigger (b65) or otherwise fails twice to move back into the range, I will usually look for BP instead.

A second option is to recognize failed L2s as a soft trend move and buy above the next signal bar (b36 or possibly b38, b53, b73). The brave can buy the close of the second attempt on limit with a stop below the next lower bull bar or a tight money stop.

7 comments:

  1. Hey Cad,
    Good post.
    1. If the bar 6 low went below bar 5 red bar low, would you have shorted it as 1 Rev?

    2. I am assuming you skipped the FBO @ b25 because of the red bar. What about taking a long 1 tick above the green bar @ b26?

    3. I don't see a reference to the channel. Can you point the bars you used for the channel.

    4. FH2 @ bar 19 is it something you look for and short?

    Thx,
    Buster

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  2. Would you consider b19 as A2 even though it didnt touch the 20 MA?
    Thx,
    Buster

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  3. What do the numbers under the bars mean? For example under Bar 1 you have +2,+0. Under Bar 6 you have +3,+4,+0. Thanks.

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  4. SneakOner, those are exits. It means I exited some contracts at +3 some more at +4 and then was stopped out at breakeven when the price pulled back.

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  5. Buster, b19 is not an A2 since b17 outside bar resets the count.

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  6. Cadaver,
    Thanks for the quick response. It looks like you want A2 to be a HL as everytime we have a LL, it resets your count. Right? In this chart, b15 had a LL so count reset & b19 had a LL so count reset. So A1 is b26 and A2 is b34. Correct?
    Thx
    B

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  7. I see in some trades you do +2, +0 others +3 +4 and yet others +1 +3. Even your T1 seems to be different for different trades / setups. Your targets are different for different setups @ diff time? At what point do you make your stop to BE.
    Thx,
    B

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