I have quite a few TA booksand i've never seen this pattern given a name. It's basically a congestion-to-expansion crossover signalled by an multiple-EMA convergence. I'll name it after myself if nobody else has given it a name. It's a VERY POWERFUL pattern!
The chart posted previously is labeled 6EU9 at the top left. It's off the board by now. It was just an illustration and I didn't mark the date.
But here's a much more interesting chart of 6BZ9 (December 2009 Pound/USD) from Thursday last week when the BoE announced interest rates at 8 AM local time. The pattern ocurred three times in just 21 hours of a single day. The three rallies started at 3 AM and ended at midnight.
There are three fan-shaped rallies on this single day's chart that total 20 + 180 + 90 = 290 ticks, all long trades. Over $2k possible gains for a nimble trader on only one 6B contract.
The first was just 20 ticks starting at 3 AM purple Fib line and lasting only 20 minutes. It was pretty much a failed rally.
The second was a 180-tick rally starting at around 1.650 at 8 AM when BoE announced and it ended at just after noon at around 1.668. The setup there was NOT EXACT, so the algorithm needs to account for some slop in how close the EMAs are. The second rally started around the same purple Fib line as the 3 AM 20-tick rally but it kept going all day with just two retraces that didn't violate the uptrend.
The third started at 8 PM at 1.6650 and it ran to HOD at 1.6742 as marked at just past midnight. 90 ticks.
This is a SIGNAL that i use to think about taking a position and it's USUALLY good for at least 90 ticks up or down if it keeps going.
Total gains after these signals that day were 290 ticks on a $6.25/tick contract.
It's not a Strategy, so there are no stops from the pattern. It's a SIGNAL for me to consider taking a position. I would exit the trade based on stop-loss, MACD, and/or RSI as well as slope and channel adherence ... standard trade decisionmaking.
BUT. If you can think of any way to predict the length of the move, please share. Don't go by these two charts. Code it up and see it for yourself. It seems to work best for the major currencies (6B, 6A, 6E, 6C) but *sometimes* it works for CL if it's coming out of a long flat consolidation. The moves are USUALLY parabolic, unlike the Pound that day or the Euro earlier.
I'd like to have my OEC Trader play a WAV file to let me know when this pattern occurs on an open chart.
If anyone is willing to work with me on refining this and helping me implement it into EasyLanguage or C# for openecry, please PM me! I REALLY REALLY want to be able to have my trading platform sound an alarm, because evebn if i have it running, i might be in a trade or looking at something else and i miss a very big move signalled by this pattern. PLEASE HELP ME!
