Friday, April 8, 2011

A channel like trend usually has a second similar leg

When a trend that is moving practically in a channel, it will effectively act as one leg (and usually is on a larger timeframe). When such a trend breaks, there is a very good chance that the break is simply a pullback and the trend will resume into a second leg of comparable size.

b25 broke the AM down trend and terminated the first leg. A strong outside bull bar in a bear trend is a trading range and you should trade it like a trading range. If there is a strong breakout, you could trade a BP (b36) and if it fails, you could trade a fBO that should take you to the other end of the range.

At this point, you could take a BP short. A second attempt (b57) is effectively an A2 and therefore a high probability short.

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