I think the rule is BO on decreased volume must fan, while BO on increased volume may fan. There's also a post somewhere by Spydertrader, saying if trendline is broken on decreased volume the market is telling us we've got our trendlines wrong. I'll try to find it.
http://www.elitetrader.com/vb/showthread.php?s=&postid=1414480#post1414480 http://www.elitetrader.com/vb/showthread.php?s=&postid=1382546#post1382546 http://www.elitetrader.com/vb/showthread.php?s=&postid=1449340#post1449340
Thanks romanus for feedback. This is a question I posted yesterday. . . can a Lateral formation with a bar b/o be a point 1 to 2, or even a point 2 to 3 and be valid? I am just not sure if it is valid to do. For anyone just popping in, we are discussing the b/o that occurred on bar 41, I have 12:45 bar 39 ,beginning of a lateral formation, exiting an up traverse.
Look at the market today. If you fan out, how many repeated signals for change result while the market resumes its upward move (ES 13:20 - 13:35 [close of] Bar)? Does this seem right? Clearly then, the market has shown a subtle difference between today and what you know from the past. Locate the subtle difference. Everyone needs to transition from the 'rule based' mindset until they locate the differences which form the rules in the first place. Resist all attempts to overcomplicate things. - Spydertrader
re: fan vs. BO I took Spyder's comments to mean increasing volume at some point after the BO. Obviously if you have the channel drawn correctly, it will be at the RTL. I think some room should be given in case you dont have the exact channel drawn in.. See pic below
It seemed right for the price going from pt2 to pt3. I think if one keeps fanning that up traverse, most people annotated, one arrives at the picture that says: "it (the traverse with pt1 at 1105 eob) shouldn't be there in the first place."