I realize everyone has their reasons for entry and exits. I know it is hindsight but but if you will indulge me I will show you how I would trade this PA. There are many things that can be said about this so I may post the chart several times to explain the concepts without trying to cram it all in one chart.
A. First I am looking for buying selling pressures in the larger context before I take a position long or short.
B. Then I am looking for a possible setup within that larger context.
C. Next I am looking for a signal bar.
D. Finally I am looking for an entry bar.
E. Then I take a position (long or short) and at the same time set my initial SL and PT.
So first some big picture context concepts. Starting at the left of the chart.
Bear trend (red down arrow). That downward move consists first of a move down from top followed by a pause that became some sideways action. That first move down (within that big red arrow) had gaps between low of bar and close of previous bar and previous two bars. That is urgency and selling pressure. Then some sideways PA (first blue area) In that sideways action a there were a couple of bull gaps (high of bar higher than close (and or high of prev bar...both things are gaps). So, bulls are pushing back in the sideways PA. But notice a cuadruple top is formed with tails on top of the bars. This indicates more selling. Bears are trying to push market back down. Will they succeed? We don’t know yet. That sideways action morphs into a triangle within (nested) the sideways move. That means bears are pushing. Bulls are pushing back. The apex of the triangle has formed and that means a BO is most likely forthcoming. Which way up or down? We don’t know yet. Over all from context and sideways action there is more selling pressure so it can be anticipated the BO will be south. The larger context indicates selling pressure. The sideways move indicate selling pressure. The triangle in that larger context indicates selling. So what happens? Bo is south. In effect the sideways move was just a bear flag that morphed into a nested triangle that was followed by a BO south. I might would have traded this BO of the triangle but to keep things simple I will make my first trade later in the chart.
The BO from the triangle flag was 3 fairly big bear bars with gaps. This second move down (within the larger red arrow) is followed by a small flag. This is profit taking by the bears who sold the BO of the triangle. They succeed in pushing it down a little more then the bulls push back. Together these forced form the second sideways action (blue) at the bottom. In this sideways action we have a reversal with 4 bull in sequence and gaps (i didn’t mark the gaps but you can see them as describe above earlier), followed by a small bear bar (pause) then a larger bull bar that breaks out of the sideways PA. Will the BO hold? We don’t know yet. Then we get two bear bar with tails on top. Bears are trying to make the BO fail. But the BO resumes as the bulls are pushing back with 3 bull bars in sequence. This means they are a tad stronger in the immediate context but the larger context (all way from the left of chart is bearish). Who is gonna win and is the BO gonna end up being a successful bull reversal from the bottom of the chart where the reversal started.
Well lets look at the larger context and immediate context and come up with some probabilities.
Larger context is bearish with two legs down to a bullish reversal. That bullish reversal breaks out of the profit taking sideways range formed at the bottom as bears get their profits from this 2 legged move down. The entire move down also has within 3 pushes down. That is a wedge bottom. A reversal pattern. In the more immediate context the the reversal consists of 4 bull bars in sequence followed by a small bear bar then a bull bar that breaks above the sideways action AND above the bear flag at the bottom. That is buying pressure.Then we get two bear bars with tails as bears try to make the reversal fail as mentioned earlier. But the bears fail and BO resumes. Will it be a successful Reversal/B0? We still don’t know but the signs are pointing in that direction. One sign is the sequence of bull bars after the reversal at the bottom and the sequence has gaps. A second sign is the reversal and apparent BO form a TIGHT channel. Tight channels are a sign of pressure. In this case bullish.
So what are we waiting for to take a position? Well I want to see the BO from the blue sideways PA at the bottom hold preferably with a gap and then I want a signal bar and an entry bar. Once the BO resumes outside of the blue box we get a PB in the form of a doji bear bar. It is basically a doji as the bear body is so small. It is a range bar meaning bulls and bears both are exerting pressure. This is the second attempt by the bears to make the BO fail. But they fail. The next bar is a bull bar that goes above the doji. Bulls are stronger. That is my signal bar. If I see a bull bar after this signal bar I am going long for at least a measured move up (initial PT based upon PA up to this point but even it is subject to change IF price stall too much going up to the measured move.,,ROFLMAO). Why take my position now? Well because the bears failed twice to make the Reversal BO fail and they failed to make it fail. In their second attempt they could not even push price back down to the BO point (top blue line) so a gap formed (yellow). While this final bear attempt is a PB in the form of a doji it is technically not a PB because the low of the red doji didn’t go below the low of the previous bar. But I call it a PB because functionally it is a WEAK PB and if you dial down to a smaller TF you will see it is a PB on the smaller TF. In figure I got about a 70% chance of a second leg up to a measured move. Now, remember high probability means less reward. In this particular case why is this so? Well, I could have gone long at the bottom blue line on the reversal but I had no proof that bulls were strong enough yet to cause a successful reversal. So I waited for that evidence. That means I gave up the profit that could have been made in the first leg up out of the blue lines. I trade out larger reward for larger probability.
So, I get a signal bar followed by a bull entry bar. So I am long on that entry bar. Anywhere on the bar but generally best to wait very near close to see if it closes as a bull or bear bar. My initial PT is a a measured move up (black circle). I will show the measured move up on another version of the same chart and why I exit there. After my entry I have two PA stop losses. I really don’t want to see price go back into that blue line area after breaks out again from the bears first attempt to make it fail (that attempt is the 2 bear bars with tails on top at top blue line) so I place my first SL just below that first attempt to make the reversal BO fail (red dot). The second red dot below the reversal at the bottom of the chart is my max SL. This is actually the more correct SL for the total price action that has transpired so if need I can move my higher stop loss down there. The decision to do so would be contingent upon the dynamic of “how” the bears pushed back. As it turned out the bulls overwhelmed them so the higher stop loss held. If price would have traded back into the blue lines and continued south of the lower line then i am exiting at the very latest with a loss at the lower SL. Why? Because this reversal BO is turning into a range that is most likely just a bear flag in the larger context from the top left of the chart to the bottom where the reversal started. So, I will cut my losses right there at that larger stop loss double up and go short. My long premise is wrong and I need to get short to get back in sync with the PA.
Nevertheless, as it turned out the upper SL held and I am looking for PT at a measured move up.
A. First I am looking for buying selling pressures in the larger context before I take a position long or short.
B. Then I am looking for a possible setup within that larger context.
C. Next I am looking for a signal bar.
D. Finally I am looking for an entry bar.
E. Then I take a position (long or short) and at the same time set my initial SL and PT.
So first some big picture context concepts. Starting at the left of the chart.
Bear trend (red down arrow). That downward move consists first of a move down from top followed by a pause that became some sideways action. That first move down (within that big red arrow) had gaps between low of bar and close of previous bar and previous two bars. That is urgency and selling pressure. Then some sideways PA (first blue area) In that sideways action a there were a couple of bull gaps (high of bar higher than close (and or high of prev bar...both things are gaps). So, bulls are pushing back in the sideways PA. But notice a cuadruple top is formed with tails on top of the bars. This indicates more selling. Bears are trying to push market back down. Will they succeed? We don’t know yet. That sideways action morphs into a triangle within (nested) the sideways move. That means bears are pushing. Bulls are pushing back. The apex of the triangle has formed and that means a BO is most likely forthcoming. Which way up or down? We don’t know yet. Over all from context and sideways action there is more selling pressure so it can be anticipated the BO will be south. The larger context indicates selling pressure. The sideways move indicate selling pressure. The triangle in that larger context indicates selling. So what happens? Bo is south. In effect the sideways move was just a bear flag that morphed into a nested triangle that was followed by a BO south. I might would have traded this BO of the triangle but to keep things simple I will make my first trade later in the chart.
The BO from the triangle flag was 3 fairly big bear bars with gaps. This second move down (within the larger red arrow) is followed by a small flag. This is profit taking by the bears who sold the BO of the triangle. They succeed in pushing it down a little more then the bulls push back. Together these forced form the second sideways action (blue) at the bottom. In this sideways action we have a reversal with 4 bull in sequence and gaps (i didn’t mark the gaps but you can see them as describe above earlier), followed by a small bear bar (pause) then a larger bull bar that breaks out of the sideways PA. Will the BO hold? We don’t know yet. Then we get two bear bar with tails on top. Bears are trying to make the BO fail. But the BO resumes as the bulls are pushing back with 3 bull bars in sequence. This means they are a tad stronger in the immediate context but the larger context (all way from the left of chart is bearish). Who is gonna win and is the BO gonna end up being a successful bull reversal from the bottom of the chart where the reversal started.
Well lets look at the larger context and immediate context and come up with some probabilities.
Larger context is bearish with two legs down to a bullish reversal. That bullish reversal breaks out of the profit taking sideways range formed at the bottom as bears get their profits from this 2 legged move down. The entire move down also has within 3 pushes down. That is a wedge bottom. A reversal pattern. In the more immediate context the the reversal consists of 4 bull bars in sequence followed by a small bear bar then a bull bar that breaks above the sideways action AND above the bear flag at the bottom. That is buying pressure.Then we get two bear bars with tails as bears try to make the reversal fail as mentioned earlier. But the bears fail and BO resumes. Will it be a successful Reversal/B0? We still don’t know but the signs are pointing in that direction. One sign is the sequence of bull bars after the reversal at the bottom and the sequence has gaps. A second sign is the reversal and apparent BO form a TIGHT channel. Tight channels are a sign of pressure. In this case bullish.
So what are we waiting for to take a position? Well I want to see the BO from the blue sideways PA at the bottom hold preferably with a gap and then I want a signal bar and an entry bar. Once the BO resumes outside of the blue box we get a PB in the form of a doji bear bar. It is basically a doji as the bear body is so small. It is a range bar meaning bulls and bears both are exerting pressure. This is the second attempt by the bears to make the BO fail. But they fail. The next bar is a bull bar that goes above the doji. Bulls are stronger. That is my signal bar. If I see a bull bar after this signal bar I am going long for at least a measured move up (initial PT based upon PA up to this point but even it is subject to change IF price stall too much going up to the measured move.,,ROFLMAO). Why take my position now? Well because the bears failed twice to make the Reversal BO fail and they failed to make it fail. In their second attempt they could not even push price back down to the BO point (top blue line) so a gap formed (yellow). While this final bear attempt is a PB in the form of a doji it is technically not a PB because the low of the red doji didn’t go below the low of the previous bar. But I call it a PB because functionally it is a WEAK PB and if you dial down to a smaller TF you will see it is a PB on the smaller TF. In figure I got about a 70% chance of a second leg up to a measured move. Now, remember high probability means less reward. In this particular case why is this so? Well, I could have gone long at the bottom blue line on the reversal but I had no proof that bulls were strong enough yet to cause a successful reversal. So I waited for that evidence. That means I gave up the profit that could have been made in the first leg up out of the blue lines. I trade out larger reward for larger probability.
So, I get a signal bar followed by a bull entry bar. So I am long on that entry bar. Anywhere on the bar but generally best to wait very near close to see if it closes as a bull or bear bar. My initial PT is a a measured move up (black circle). I will show the measured move up on another version of the same chart and why I exit there. After my entry I have two PA stop losses. I really don’t want to see price go back into that blue line area after breaks out again from the bears first attempt to make it fail (that attempt is the 2 bear bars with tails on top at top blue line) so I place my first SL just below that first attempt to make the reversal BO fail (red dot). The second red dot below the reversal at the bottom of the chart is my max SL. This is actually the more correct SL for the total price action that has transpired so if need I can move my higher stop loss down there. The decision to do so would be contingent upon the dynamic of “how” the bears pushed back. As it turned out the bulls overwhelmed them so the higher stop loss held. If price would have traded back into the blue lines and continued south of the lower line then i am exiting at the very latest with a loss at the lower SL. Why? Because this reversal BO is turning into a range that is most likely just a bear flag in the larger context from the top left of the chart to the bottom where the reversal started. So, I will cut my losses right there at that larger stop loss double up and go short. My long premise is wrong and I need to get short to get back in sync with the PA.
Nevertheless, as it turned out the upper SL held and I am looking for PT at a measured move up.
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