LW has some pretty good ideas here:
As someone who has been studying the markets since 1962, I assure you that not all market moves are predictable. But there are some reliable patterns I have discovered over the years that can be of great value. The false break buy and sell pattern is one of them.
Markets seldom bottom on what is commonly known as the key reversal... I've lectured on that point for many years. Markets have more twists and turns to them than a climb up the Cooke City Highway in my native home of Montana. Each twist and turn on the highway is a little different than the last one, yet in there are similarities in roads as well as in markets. I would like to show you a very simple pattern with a solid record of calling short term explosive moves in stocks and commodities.
The false break buy and sell pattern
The idea of the pattern is pretty simple... and pretty emotional. What I am looking for to set up a buy signal is a day that closes below the prior day's low. Such days, (aka, naked close days), look very bearish on a chart and typically act as a continuation of a market decline. Usually when this condition is reversed (i.e. the very next day it takes out the high of the down close day), we find good market follow-through to the upside.
The exact opposite of this creates a sell signal; a market makes a close greater than the prior day's high, then the very next day takes out the low of the up close day. I have taught this to many traders at seminars and written about it in my books for several years.
However, there is a new dimension we can add to this pattern. I am surprised people have not noticed this little twist: if on the day following the naked close we have a naked close in the opposite direction, we typically have established a reversal point in the market.
In other words, we have a down close below the prior day's low. Then the very next day we have an up close and a close above the high of the down close day. That is extremely unusual action and tends to be quite bullish.
The opposite of course will be a bearish situation, a day that closes greater than the prior day's high and then the very next day closes below that same day's low.
The following chart gives you an idea of how these patterns actually operate in the marketplace.......
http://www.tradingmarkets.com/.site/stocks/commentary/editorialarticles/-77261.cfm
As someone who has been studying the markets since 1962, I assure you that not all market moves are predictable. But there are some reliable patterns I have discovered over the years that can be of great value. The false break buy and sell pattern is one of them.
Markets seldom bottom on what is commonly known as the key reversal... I've lectured on that point for many years. Markets have more twists and turns to them than a climb up the Cooke City Highway in my native home of Montana. Each twist and turn on the highway is a little different than the last one, yet in there are similarities in roads as well as in markets. I would like to show you a very simple pattern with a solid record of calling short term explosive moves in stocks and commodities.
The false break buy and sell pattern
The idea of the pattern is pretty simple... and pretty emotional. What I am looking for to set up a buy signal is a day that closes below the prior day's low. Such days, (aka, naked close days), look very bearish on a chart and typically act as a continuation of a market decline. Usually when this condition is reversed (i.e. the very next day it takes out the high of the down close day), we find good market follow-through to the upside.
The exact opposite of this creates a sell signal; a market makes a close greater than the prior day's high, then the very next day takes out the low of the up close day. I have taught this to many traders at seminars and written about it in my books for several years.
However, there is a new dimension we can add to this pattern. I am surprised people have not noticed this little twist: if on the day following the naked close we have a naked close in the opposite direction, we typically have established a reversal point in the market.
In other words, we have a down close below the prior day's low. Then the very next day we have an up close and a close above the high of the down close day. That is extremely unusual action and tends to be quite bullish.
The opposite of course will be a bearish situation, a day that closes greater than the prior day's high and then the very next day closes below that same day's low.
The following chart gives you an idea of how these patterns actually operate in the marketplace.......
http://www.tradingmarkets.com/.site/stocks/commentary/editorialarticles/-77261.cfm
