Thursday, June 23, 2011
A trendline break (b7-9) followed by a successful test of the extreme (b17) is a major reversal. But when a trendline breaks (b32-36) but the test of the high fails (b41-44), the trend is likely to accelerate, giving larger swings. This is why its always a good idea to enter in the direction of the trend when the trend line first breaks. If the trend accelerates, it forms a new trend supported by a new trend line (b17,37).
Strength early in the day (b6-8) often gives an indication of strong moves later and without this, you may wish to pass up buying the trend break except under excellent setups.