Friday, November 4, 2011
2 Failures to close gap
On many days when the market opens with a reasonable sized gap (4+ points), the market will try to close the gap twice. If it fails on both attempts, there is a high probability of a strong trend in the direction of the gap before the market tries to move against the gap.
The larger the gap, the larger the trend move before any attempted reversal.
Today opened with a reasonable gap and a doji bar b1 with a close near the low of the bar, which is a poor signal for a long and was likely to fail. The second signal was another doji but with a higher close and was also a failure. The presentation of poor counter-trend signal bars is a strong indication of continuation of the trend.
Two failures led to the market breaking into a trend and extending the gap all the way to bar 14. On the way, a fH1 at b9 marked a precise exit near the low of b14.
Video of trade available on youtube