Tuesday, February 8, 2011

The classic A2


Today's post is regarding continuation in a trend and represents the top left corner of the nine transitions.

A 2 legged pullback that gives an entry just above or below the ema is called an A2 (for 2 Legged move to Average). The ema used by Brooks system is a 20 bar exponential moving average. A well formed A2 looks like the one from bars b12 to b20.  The move is mostly trend bars and there is a clear trendline break of the pullback at b16 and a second leg down to b20, which closed strong.

Not all A2s are that clear. Sometimes it may be as simple as 2 failed attempts to turn down such as the move from b31 to b35. b32 tried to fail the new high and so did b35. The bars were dojis, which are trading ranges. Normally A2s that are made hard to read dont go very far and are best passed up. The only exception is during a soft trend day when every entry is an A2 made of overlapping bars.

If an A2 is not made of good looking bars, you may wish to wait for an additional confirming signal to increase its chances of running for a swing such as a double bottom or G bar. For example, b50 was a G2 bar in addition to being an A2 long entry. Since G2 itself is a high probability trade.

2 comments:

  1. I am grateful for your mentoring cad. On this day I noticed that b66 found support at the TL from b4, b50 & b52. Would the H1 1t above b66 then not have been a good R/R trade? Although not an A2 I presume that it is a 1PB at the TL.

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  2. When its arguably a 2 legged move such as due to the bull bar b64, it often works like an A2 and is worth taking if a) you have additional reasons such as ema and trendline support and b) the pullback is sufficiently deep (6t for scalp)

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