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2011-08-30

Poor 1PB setups on soft-trend days



1PB is usually the best opportunity for a swing trade on a trend day and I normally take it even if it looks poor. A great example of a poor setup was this day. b6 and b8 are not really 1PBs because at that point, we are probably in what appears to be a trading range. 1PB is a setup in a new trend and it will usually fail in a trading range.

However on a large gap day and a strong b1, there is still some chance its going to trend (as it eventually ended up doing) and what could possibly be a 1PB may be worth the risk/reward.

A deeper pullback to the ema at b21 or 25 is a far better entry since its at a support, 2 legged and below the trading range.

The second feature of a large up gap followed by a large b1 is that there is a very good chance it will turn into a soft trend. This means any fL2 such as b38 and b43 are valid setups. However, I often will only scalp them or pass them up and wait for a deep pullback such as b54. This is because a deep pullback is more likely to allow my swing stop at my entry price unmolested while it grinds higher.

3 comments:

  1. b50 was the first attempt, but the outside bar on b51 resets the count. This means the first attempt was above b52 and the second attempt was above b54

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  2. Hi Cad, do OBs always reset the count or only if traders are trapped? And if, how to determine if traders were trapped? Only if the bar before the OB is a decent SB?
    Cheers Thomas

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