Tuesday, April 10, 2012
First bar: Outside bar
When the first bar overlaps the prior day's last bar completely, it should be treated as a trading range. This means you can fade its breakout or take a breakout pullback if the breakout is strong.
An outside first bar, especially if its a large bar (and indeed any large first bar) is a fade candidate. You should never trade its breakout and if you do, take a fixed (scalp) profit. A breakout pullback, especially a 2 legged BP of a large b1 could be taken, but unless your entry bar is large, you are likely to encounter a deep pullback.
When the large bar's BO is large and gives a successful HL, there is a decent chance of spike and channel developing is high. Often the channel will be a measured move of the spike.