Wednesday, April 6, 2011

Two legged W1P

The best W and W1P are off strong reversal bars. Sometimes, the reversal bar could be an outside bar as in b32, which is a possible trading range. The entry bar could be small (b33) and its low taken out (b34). Normally, this is not a W1P candidate. However, due to the extensive overshoot, there will certainly be a bullish pullback at least.

When a bar such as b32 forms the reversal bar, due to the overlap, there is a very good chance the entry bar will be taken out. Next, if you get a failed continuation signal (such as the failed A2 short at b38), then there is a good chance it will act as a 2 legged W1P. Note that when the W signal bar and entry bar are strong reversal and trend bars, the pullback should not go more than 1t below the W entry bar.

If the W reversal bar was weak because it was bearish or a doji or too large or not a deep overshoot, this is no longer a W1P but simply a trend termination into a trading range and you should look for breakouts and failed breakouts.

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