Thursday, May 19, 2011
TCL test on open
A TCL test on open may indicate the direction of the AM trend. A second failed overshoot of one or more TCLs from yesterday may indicate a reversal or at least a 2L move away from the TCL.
When the gap is small, this can be simply viewed as a climax bar and a W type reversal on overshooting the TCL. If the gap is large, this often leads to the formation of a reversal bar and a possible trend from the 1st bar.
Drawing the TCL from the prior day prevents you from taking an entry in the wrong direction and is especially helpful after a strong trend day or two.