Here's a look at a signal failure. ADRX gapped up and expanded immediately after the open. The first three bars all closed up. So far so good. And there was contraction after this initial impulse expansion. The dummy spot was the NR7, inside bar at 11:00 am.
But it didn't work, obviously. The general tone of the market by then had turned negative again and ADRX followed suit.
What was wrong with the scenario?
I can point to two things. One, while the third bar had a positive close, it left a long upper tail. In effect, it was an inverse hammer. This meant that the buyers were beaten back by the selling pressure. Also note that on a daily chart, this is the resistance level from mid August.
The second thing is that after the impulse move up, price rested (or floundered) quite a bit. From the fourth bar, which was the first down bar after the open (on a 15 min chart), price spent the next hour going nowhere. This sort of indecision is further proof that there wasn't really a lot of buying interest to propel price past the morning high set by the third candle's high.
Those are my thoughts but I'd appreciate hearing others' opinions as well.
But it didn't work, obviously. The general tone of the market by then had turned negative again and ADRX followed suit.
What was wrong with the scenario?
I can point to two things. One, while the third bar had a positive close, it left a long upper tail. In effect, it was an inverse hammer. This meant that the buyers were beaten back by the selling pressure. Also note that on a daily chart, this is the resistance level from mid August.
The second thing is that after the impulse move up, price rested (or floundered) quite a bit. From the fourth bar, which was the first down bar after the open (on a 15 min chart), price spent the next hour going nowhere. This sort of indecision is further proof that there wasn't really a lot of buying interest to propel price past the morning high set by the third candle's high.
Those are my thoughts but I'd appreciate hearing others' opinions as well.
