Monday, January 23, 2012

Reading weak reversal signals


When a reversal signal looks weak, whether its an oio (b8-10, b32-34) or a regular reversal bar, if the entry bar has a strong close (shaved or 1t) like b11, then there is a very good chance it will act like a reversal bar with a strong close. Often, such a bar is a strong reversal bar on a higher timeframe when combined with the strong entry bar as the 30m chart on the left illustrates the opening reversal at b8-10.

2BR (b76,77) can be considered strong as long as the second bar takes out the first bar with a strong close and are of comparable size and not misaligned by more than 1t or 2t if shaved.

When a reversal signal that is poor has a poor entry bar (b28, b70), there is a good chance of continuation.

When the signal indicates a major change in direction (b11,b35), usually its a far safer option to take the first pullback in the new direction (b17,b43). When a signal is ambiguous, the chances of a pullback very soon after the reversal are high.

2 comments:

  1. Cadaver, would you please be so kind to go over today's ES/spy price actions? how did you trade them? Thank you.

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  2. Cadaver, would you please be so kind to go over today's ES price actions (Jan 25, 2012)? How did you trade them? Thank you.

    ReplyDelete