One of the surest signs of a strong trend is that reversal signals will have no takers. This is because traders find the bear close to be a buying opportunity and in most cases, you should cancel an order if it does not trigger from the signal bar.
For example b36,37 was a possible sell signal after 3 pushes up, However, since it did not trigger, you should consider going long instead. This would allow you to buy above b41, a strong close after two legs down in a strong trend.
Similarly b62 was a possible 1tf after a shallow TL break making it a major reversal candidate. But since it did not trigger, you should not go short. However, due to the trend break, you should not look to go long either.
The right course of action is to wait till the range is 4 points or larger and then trade fBOs or wait for a BP or other new trend.
Cad,
ReplyDeleteWhy didn't the outside bar b20 & outside bar b64 on 2/15/2012 reset the leg count?
thanks,
Manuel
The idea behind A2 is to look for 2 legged pullbacks. It was basically two legs down with L1 from b14-18, a pullback at b19 and another leg down at b20. When the legs are not clear due to overlap, you are forced to count bars and resetting on outside bars allows us to trade them as mini-TR, by taking a BP instead of a BO.
DeleteCad, thank you very much. I understand the A2 a lot better now.
ReplyDeleteYou wrote in your 10/24/2011 post that once the trendline is broken, there is no longer the possibility of an A2. Isn't that the case at b15-16? Or am I misunderstanding?
ReplyDeleteJohn
When a pullback is very shallow, the entire move is usually counted as a leg. Therefore b6-14 is one leg and no TL is broken
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