Friday, October 28, 2011
1tf point to change in direction
Failures often make very good signals and 1tf in particular make excellent markers of a turn in the market. 1tfs are also excellent with-trend entries, so you should be careful to distinguish between the two.
The classic 1tf is a failure caused by trying to take a reversal before a trendline break of sign of counter-trend strength. This is usually a continuation signal. Sellers below b14 (b14,15 inside bar variant requires an entry below b14) were trapped in a 1tf.
A 1tf can also be a reversal indicator in certain circumstances. For example, b25 was a 1tf above the prior swing high of b21 on an ii flag, which acts as a final flag. Similarly, the ii variant at b39 turned into a 1tf reversal. Final flag variants are often 5tfs such as b25 (went 5t above b24), but they can sometimes be 1tf as illustrated by b41.
There were another kind of 1tfs today. b6 trapped buyers in by triggering above b5 and took out its low by 1t before turning back up. Such a double trap followed by a 1tf is a kind of micro-wedge (3 pushes on 1m chart) and usually indicative of market direction change.