Can someone please give me an example of what Linda Raschke means by a power buy/sell setup? I've scowered the internet and her website looking for a definition/example and have come up blank. It looks like a simple a.b.c. correction after an impulse high, but my intuition is telling me its someting a little more advanced than that. Any info would be appreciated...thanks.
This is a bull or bear flag on a higher time with the lower time frame forming a so-called ABC correction. You would want to see a good impluse before the bull or bear flag. These set ups obviously aren't as common as plain ole' regular bull/bear flags. So, if you see a bull/bear flag on a daily chart, drop down to a 60 minute or 30 min chart and see if that flag is really an ABC formation. If it is, then you've got a power buy/sell set up. The reason this pattern can sometimes lead to a bigger win is because the a-b-c formation tricks people into thinking it's a trend reversal but it's really a trend continuation pattern on the higher timeframe. So, people get trapped and have to bail which obviously just adds fuel to the fire. -eLindy
That's great, thank you for the explanation. What is the trigger that defines the formation? Is it a break through the b wave? Do you have any examples you may be able to post?
I'm not sure I understand the first part of the question but if you're asking about a trigger for entry I would have to say it's the same trigger as you would use for a regular bull/bear flag - you just need to wait until you see the 2nd leg of the ABC formation starting to build. I personally am not that good at timing retracement trades so I tend to scale in and get an average price. I also look for reversal patterns on an even lower timeframe combined with a bit of "tape reading" to see where price is stalling out to try to time the entry. A divergence of some kind on a lower time frame or other chart formation that gives you a risk point is all you really need (once that 2nd leg of the ABC formation starts to build and flesh out the flag on the higher timeframe). As for pictures - I'll see what I can do about those....good power buy/sell patterns don't happen that often - especially these days where early breakouts seem to be the name of the game. -eLindy
File Example Uploaded.... Crude - Weekly Bull Flag with Daily quasi ABC Down. I hope this helps. -eLindy
Not posted In that chart example is the 60 min chart. On June 28th, there was a quasi-buy divergence forming on the oscillator I use that could have been used as an entry (in theory - I did not make the trade). If you're playing a weekly bull flag, the risk on a 60 min divergence pattern relative to the reward on the weekly pattern would have been a good one. I hope this helps a bit more. -eLindy
So essentially, it's a false breakout (other direction than the higher time frame) in the lower time frame while undergoing consolidation in the higher time frame. If the SPX breaks below 1168 and then rallies over 1190, I believe that we will have a similiar setup.