Tuesday, August 30, 2011

Poor 1PB setups on soft-trend days

1PB is usually the best opportunity for a swing trade on a trend day and I normally take it even if it looks poor. A great example of a poor setup was this day. b6 and b8 are not really 1PBs because at that point, we are probably in what appears to be a trading range. 1PB is a setup in a new trend and it will usually fail in a trading range.

However on a large gap day and a strong b1, there is still some chance its going to trend (as it eventually ended up doing) and what could possibly be a 1PB may be worth the risk/reward.

A deeper pullback to the ema at b21 or 25 is a far better entry since its at a support, 2 legged and below the trading range.

The second feature of a large up gap followed by a large b1 is that there is a very good chance it will turn into a soft trend. This means any fL2 such as b38 and b43 are valid setups. However, I often will only scalp them or pass them up and wait for a deep pullback such as b54. This is because a deep pullback is more likely to allow my swing stop at my entry price unmolested while it grinds higher.


  1. b50 was the first attempt, but the outside bar on b51 resets the count. This means the first attempt was above b52 and the second attempt was above b54

  2. cad,
    I'm not quite sure what you mean by "b51 resets the count".
    Do Outside bars b65 and b68 also resets the count then?

  3. z.cui, when in doubt, always treat outside bars as resetting the count.