Friday, September 2, 2011

The most recent reversal determines direction of 1PB

Everytime there is an opening reversal (OR) after a trend move (b3-b5, b6-b7), you should expect a 1PB in the direction of the latest reversal. This is because 1PB is the first pullback in a trend and when the trend reverses, the expected direction also changes.

1PB is usually reversible. This means that if your 1PB entry immediately gives a signal counter to your entry, you entered incorrectly and should probably reverse your position. For example, if you missed the inside bar reversal at b8 and took a 1PB long at b10, you should reverse short at the 1PB short on b12. This way, your 1PB entry is usually self-correcting.


  1. I often have a problem identifying a reversal from a pullback. In the above example, I see b6 as the OR. B7 is clearly the big move of the morning making b8-9 the 1st pullback. Next, b13-14 completes a 2-legged pullback for a A2 long which looked like a great signal to me. It only became clear to me after b21 that b8-9 was a reversal. How can I make this determination earlier? Was the strength of b9 enough to convince you that this was a reversal and not a pullback?

    Thanks Cadaver and great blog!

  2. shaft,

    Always watch out for multiple reversals in the first hour. When the 1PB long at b10 refused to take out the hod and instead gave a 1PB short at b12, its clear that b8 was a reversal and b7 was a 1 bar false breakout.