Wednesday, February 9, 2011

One legged moves to ema

A common sign of the end of a trend and often the beginning of a reversal is a one legged move to the ema and close beyond it. Today showed several of these cases and a conservative trader can simply enter with the new trend on its first pullback.

Today's first such move was from b5 to b7. Had b5 not ticked below b1, it would have been a two legged move and therefore a possible sell signal. Similarly the move from b17 to b19 was one legged and even though it did not quite close below, a fraction of a tick is close enough to sell below the pullback bar b20.

The overlap of the tail and only a fraction of a tick overshoot of the TCL on b35 made the wedge signal rather weak but a one legged move on strong trend bars meant there would be another leg up at least and if the signal bar b43 did not have such an overlap or if the pullback was deeper, I'd have taken the trade instead of passing it up.

The move from the final flag at b49 to b52 was one legged and made of shaved bear bars. The first pullback however was b57 inside bar, which forced a sell at the bottom and is riskier. After a close below the ema, any small trend bar in the direction of the move can be used as a signal bar especially if its shaved.

Strictly speaking the move from b64 to b69 was not strictly one legged, but for our purposes, since the price only ticked one tick below previous bars and turned into outside up bars, you could easily treat it as a one legged move. In this particular case, it shouldn't matter, since the strong overshoot has already confirmed the reversal.

1 comment:

  1. Exemplary trading Cad, looks like you got all the major swings. B17 top tick was at the close of the 8th of Feb and 1t beyond a MM of the opening range. It was a G bar as well as being 1Rev short. Also there was an OS on the MTCL so that's 5 reasons to take the trade which was the best short of the day.