Back again. OK MM's. The first chart is a 30 min chart. The second chart is a 5 min chart. Bear channels on a smaller chart function as bull flags on a larger TF chart. So, understand a bear channel on a smaller TF is a bull flag on a higher TF.
Now Bull flags are continuation patterns from a previous bull trend. Usually the BO from a bull flag is bullish. That is, on the smaller 5 min TF the BO of the bear channel (which is a bull flag on 30 min chart) is normally on the north side of the channel and not the south. That is normally what happens. Why because bear channels tend to have there BO's on the north side because they are bull flags on a larger TF!
However, as we all know the market can throw curve balls and unexpected things can and do happen. So, when the unexpected or unlikely event happens, then look for a measured move in the direction of the unexpected price move.
Look at the second chart which is a 30 min chart. We see the bull flag. That BIG bear 12:00 bar is the unexpected event. On the 5m chart it is the multi-bar successful BO south that began on the bar after my exit on that 5 min chart.
I was playing for a long position at the bottom of this bear channel and I went for a 2 point scalp which I got on the next bar. Again, on the next bar after my exit we got the successful BO south out of the bottom of the channel. The expected BO on the 5 min chart should be north. But it was south! So that was the unexpected event. On the 30 min chart it (the unexpected event) shows up as that huge 12:00 bear bar. ON the 5 min it shows up as a two legged move down. With an implied PB after the first leg down (bar 12:15) Then a measure move consisting of a second leg down.
There is more than one way to measure the MM move but either way is profitable. The second chart shows the measure move down starting at the BO of the TR bottom and then the second half of the move after the implied PB ends and price continues down. Price actually went a little further down than the measure move before reversing back up.
A second way of looking at the measure move is from the BO point of the channel to the middle of that implied PB bar (bar 12:15) and extend that the same distance down for a PT. Less of a profit but still a profit. You can see this on the third chart.
There is even another third way to measure a measured move. Go back in the bear channel to bar 11:35 when the entire move down started. Measure down to the BO point of the bear channel at the bottom then extend that on down. I didn't show a chart doing this but you can visualize it.
In summary:
Anytime you see the unexpected happen THEN look for a measured move down consisting of two or more legs on the 5 min chart. And remember, there is usually more than one way to measure the measured move. The point is they are all profitable.
So the way that price moves, as the unexpected event is happening, determines which measure move I will use. If price is hopping and driving down I will likely go for the larger MM. If grudgingly heading down then I may opt for the smaller MM. Or the middle size MM. It never hurts to draw all possible MM's and watch "how" price is being made as it moves down (i.e. the dynamics) to pick which MM to use.
I never took this trade as I had to leave for the hospital right after my exit of the trade shown on the chart. But I saw what happened afterwards and wanted to make some comments about it. These are sometimes why some traders think PA patterns don't work but 50% percent of the time, which is nonsense. Just look at the bear channel. By far most BO attempts south and north failed and price went right back into the channel. That is precisely why a channel forms!
However, one has to always be cognizant that a BO top or bottom WILL happen. It a bear channel and that BO is USUALLY topside. But when it happens bottom side LOOK for a MM down.
There are other hints WITHIN the channel that an impending bear BO of the bear channel is likely and that hint are the bearish pressures shown in the channel. In other words, it was a hint that an unexpected BO might happen. What pressures you might ask? From bar 11:35 to my entry and exit bar (12:00)t here are 4 bear bars and 2 dojis. Three are consecutive bear bars. Now dojis are simply a one bar TR. I consider my entry and exit bar as a doji too as the body is less than 1/2 the size of the bar. All these things are "hints" that price is bearish and an ensuing BO of the channel MAY be south. Therefore, one can get ready mentally for an unexpected event. And if one does scalp long from the bottom, like I did, make it a quick small scalp.
You can flip these concepts around if it is a BULL channel on a 5 min chart. They function as a bear flags on a larger TF with likely BO south. But when it is north then that is the unexpected event and therefore look for a MM north!
