Getting on the correct side of the initial move is hardest when the first bar has a small or no gap from yesterday's last bar but the first bar closes strong. Generally, its best to treat it as a trading range and fade its breakouts. The next best option is to wait for a breakout and get in with trend on the first pullback.
These days generally become trading ranges or trending trading ranges but sometimes do break into trend from first bar but the odds are with a trading range.
Given todays first two strong bars, its not surprising many traders went with shorting the first pullback at b5. However, b3 was a possible first reversal and the entry bar b6 could have easily given a higher low and a long entry so not trading it was the correct option.
A second attempt to break below failed at b9 and b10 presented a long entry at the bottom of the trading range. This was an easy long trade to take. However sometimes the breakout on the other side does not give a breakout pullback and simply fails spectacularly. The signs were there but hard to read. There was a 2 bar final flag at b13 and an overshoot from yesterday's trendline and the bear strength earlier. However I missed the big move and probably so did others. As expected the market stopped at a measured move from the size of the trading range and gave a reversal bar or a down up two bar reversal. The entry bar was strong and due to the overlap, once could expect the low of the entry bar to be bought. This was tested 3 times at b27,32 and 38.
The A2 and DB at b38 and the DP at b46 were fairly easy to read. The W move to b55 gave a doji candle, so it was ok to pass it on and enter below the W1P at b60.
Cad, a question. When you refer to the A2 in the last paragraph, do you mean the short at b30?
ReplyDeleteGabriel, b30 was indeed an A2 short, but it failed to break below b27.
ReplyDeleteDue to the strong reversal at b21, a 2 legged LH is a possible A2 at b38.