Poljot, volpri may be enjoying his weekend so I'll give you my interpretation of your chart. It may not be much different than volpri's as we have both studied Brooks and while he is more of a scalper and I prefer intraday swings, we see think similarly. Your market is in a broad bull channel with the lower trend line containing the higher lows and the upper channel line showing the higher highs. It put in a double top at the recent highs which provided a good short opportunity. Risking more with a wider stop but with higher probability would be to short under the breakout bear bar under the double top. It gave an additional entry under the subsequent flag on the way down. Most channel/range breakouts fail but they do eventually breakout (down) and this one has potential given the double top and strength of the bear leg down. It is in a swing pivot down presently but late in this bear leg so a short here would be very aggressive. IMO, the better trade had not someone already gone short and taken profits along the way with now a trailing stop would be to see if the breakout (down) fails (usually within 5 bars) and take a swing pivot long. If the breakout succeeds (clear trend line break and another bear leg), short the pullback. Either of those trades has the stop either or under the entry swing.
Thank you for this valuable analysis. Is 'Brooks' some kind of an expert or a school and where can I find more details to study? I will get back later on how this chart will have unfolded.
He has books out as well as a video course containing many hours of instruction with chart examples. I can highly recommend the course.
Poljot 1) Like I said I don’t know what instrument this is, nor the TF. 2) I would like to see more bars on the left side of the chart for bigger context. So, reduce the bar size and show more bars. On a separate chart. Add a 20 ema to this larger TF chart. 3) In addition, some volume bars on the present chart are useful for gauging if the last bar is an exhaustion bar or not. So add vol bars on the present chart and resend. 4) Also will this Instrument trade overnight before the open Monday? 5) There is obviously a broad bull channel on the chart and also a trading range. I need to see the largest TF that the channel can be drawn on. And the largest TF the range appears on AND put a 20 ema on each of those TF’s. 6) The 20 period EMA on all the charts is to help gauge probability and to complete the analysis. So can you send more TF charts and be sure to label the TF for each chart. Or is this just a chart you randomly created and it isn’t even a real trading instrument?
Poljot you never sent me any more charts so I cannot assign correct proper probability. I prefer assigning probability based upon the larger and immediate contexts. So, I really need more info. I like to use the trades equation. But to really do so effectively I need more info. Traders equation: (probability of success) x (Reward) greater than the (probability of failure) x the (risk). I like to see a positive traders equation before taking a position. However, since I only have 1 chart to look at I will just take my best guess on what it will likely do based only upon the chart you sent. So, this is what I would do and also what I would do if my best guess is wrong. It is either going to go up or down. So I would be prepared for either scenario. But I am biased towards upside. Basically you wanted to know up or down. But I will show what I will do in either scenario. On the channel view or perspective: If it opens near the bottom of the channel I am going long right away and adding on or averaging down if it moves against me. Then I will wait and exit for profits as it moves towards the middle or upper 1/3 of the channel, if reversing strongly. Why? 70% of the time BO’s out of the bottom of a bull channel fail and price trades back up into the channel. However, that means 30% of the time it will continue it’s move down. So I have to be ready for that too. The higher probability based only upon the info you have provided is that it will reverse and head back up. However the market can do anything. If it opens near it’s close continues down After 5 or more bars that are overlapping meandering around but is staying below the bottom of the range then I will likely exit my longs with a loss wait for a move south, and on a PB double up short my previous position size, for a measured move down on a second or even third leg. Thus getting back my previous loss. If right after the open near it’s previous close it moves down south of the channel and does so swiftly with a big bear bar or two closing near their lows then I will not go immediately long but will get short immediately before any PB betting we will see more action south. That first bar or two after the open gives me more info to make better decisions. In summary, I am prepared for either scenario. But I will start with the long scenario first betting it will go back into the range and head north towards the middle. So, I will be taking long positions. This is, if it opens near it’s previous close. If it opens big gap down or up then I do no thing but wait to see where it is heading after the gap. As concerns the RANGE perspective. It is trading at the close in the bottom 1/3 of the yellow range box. 80% of range BO attempts fail. It is attempting to go to the bottom of the range and BO. 20% of the time a BO attempt will succeed. So if it opens still in the 1/3 bottom of the range I am going long and adding (averaging down long) all the way down and thru the bottom of the range betting the BO will fail and price will go back into the range. I will then exit on any move towards the middle of the range that gives me a decent profit. If it reaches before the bottom of the range and just Meanders around after 5 bars or so of it staying below the range I am likely gonna exit my longs and wait for an opportunity to double up and go short. Say on a PB after it moves a bit more south. If it just opens up in bottom 1/3 and blast thru on two or more big bear bars closing near their lows then I am exiting my longs with a loss and immediately doubling up short to get back my loss and quickly be back in profit. That is the best analysis I can give with the single chart you have provided. In short, i am going with the 70% and 80% but know what I will do if it takes the least likely direction on the 20% or 30%. It is least likely that the BO south will succeed in either channel or range perspective. However, from the bull channel perspective I see bull channels as bear flags on a larger TF and when a Successful BO does succeed, it will likely be south. The latter two events would have me holding for a MM south on a doubled up position. However, like I said if it gaps in a big way, up or down, on the open I do nothing, take no position but just wait for more info. I hope this is a real trading instrument and not some chart you just created and this all a game. I have no idea what the instrument is nor any idea of the time frame of the chart. You basically have not provided sufficient info for a better analysis. So, if it is a real instrument let us know what happens and tell us what instrument it is and what time frame your chart is.
Hi volpri, thank you for your analysis. I upload new chart which is 30 min bars of UIS@NYSE with added volume and 20 EMA. Is just a random ticker where I found a nice trend to follow. It appears to have been as false breakout below channel, so you were right in your assessment that most BO fail. Later it moved north and made new highs today. We are back at support at a higher price. Btw I notice that 20 EMA gives good buy signals for this ticker; I find at least 5 during one month; what is your opinion? The recent bear bar from 11,60 to 11,30 seems to me as only the first leg of a sellout, because I cannot find such magnitude move during a month! I think it will test 11,20-25 tomorrow. What do you think?
Actually my trend channel line I drew In on the first chart you sent Friday is more like this green channel line on the latest chart you sent today (monday). So basically it on went down a tiny bit on the opening bar of today then headed up. That is why I will buy the bottom of bull channels And the 1/3 bottom of trading ranges as I depicted above in the charts you sent Friday. If it goes against my initial entry I just averaged down more long waiting for the move towards the middle. As you can see it started right up and went to about the beginning of the top 1/3 of the channel. Speedo was correct also in his assessment. The basic idea from both of us was to look at going long. So, on the opening bar of today I would have been going long and adding to that if it went against me as there was no gap, up or down, on the opening bar.
As concerns PA for tomm 7-29 notice the channel appears to be flattening out and morphing into a range. That is typical market cycle behavior. BO to Channel (two Elements of a trend), then range. So, the market goes from trending to ranging. Over and over. Looks like it may be going into a range. What do I want to do in a range? Understand there is range behavior and then there is an established range. What is the difference? Range behavior is any sideways price action. It can be 1 bar such as a doji ( dial down to 1 min chart or smaller and you will see that a doji on 5 min chart is a range on the smaller TF.) That is true of any doji on any time frame. A doji on a 30 min bar is a range on 15 min chart abd an even bigger range on a 5 min chart. So, range behavior can be 1 bar. Or it may be 10 bars. Once range behavior reaches 20 bar on the chart I am trading from then it becomes an established range. That is when I then start using range trading tactics. And that is when I know the range behavior is likely not a PB, with continuation of the previous trend, but it is actually a range with a successful break out north or south both be 50% chance of happening. On my next view of your chart I will draw in the range that has actually been in process for sometime but we couldn’t see it until the bull channel started getting flatter. The beginning Of the range was there for sometime but we were more focused on the channel and may not have detected it.
Ok as we can see it is a channel but also a range. On the range perspective it closed today mid range or so. How do I trade ranges? Once price gets in to the bottom 1/3 of the range I start building a long position even averaging down long. Then I exit on any good profitable back to the middle of the range or above. So, at close price was barely getting into middle 1/3. I would wait and see if tomm it gets into bottom 1/3 and then start going long. If it instead heads up I am shorting and adding in the top 1/3 and covering on moves to the middle Or even bottom 1/3. Rationale 80% of BO attempts of an established range up or down fail and within 5 bars price goes back into the range. So depending on what price does tomm soon after the open I can go long or short. Is this an established range? Count the bars in the yellow box. More than 20? One warning it actually has been in ranging behavior for some time while this channel morphed into this range. Range behavior=overlapping bars, races up, races down, bear bar bull bar, sequence of bear then sequence of bull Bars. Since it has been in range behavior for some time BO is 50% chance north and 50% chance south but the larger contexts (all bars to left) favor slightly north. So I would say 55% north 45% south. On the flip side all bull channels are bear flags on a larger TF with likely BO, when it happens, being South. Confusing! Yes but that is a sign of ranging behavior. Learn to pay attention to the emotion of confusion. Price is then likely in a range and I have to look for range entries. Bottom line from a range perspective. I am biased to take a long position tomm. But if I were to take it Long and it went wrong and had a successful BO south of the range (a successful BO is one with Follow thru) I immediately exit, take my loss and Look for an opportunity to double up (Like a PB or large bear bar closing near it’s low) and go south getting my loss back and soon in the money again. So, to wrap it up from range perspective. I will go long or short soon after open. Slightly biased towards long side but will short just as quick. It all depends on what price does soon after the open on 7-29.
Ok to make things even more interesting I want to look at this from the Brooks concept of a MTR. In this case a higher high MTR. Speedo will know what I am talking about here. What do you need to have a MTR? First you need a break of the trendline which we got (blue line). Next we want to see it trade down to or best thru the 20 ema. It did. Third we want to see price head back up to test the previous high Just above the trendline break. It did see green line. Lastly we want to see a bear signal bar to enter short 1 tick below it. That is the setup and we got it right at the red HH MTR. Now MTR usually (but not always) have two legs downs. We saw the first leg down completed by the close of today 7-28. Then that last bar is a pause. So, tomm I would look for the second leg down to the bottom 1/3 of the yellow range lines and that is where I would be going long and even averaging down long. So, again from the MTR perspective I am biased to take a long position Soon after the open 7-29.But since the market can do anything I am still prepared to short in top 1/3 of the yellow range lines IF we don’t get the second leg down to bottom 1/3 right after the open. Rational: the MTR is taking place in a trading range context. Since 80% of BO attempts top or bottom fail I am playing the game of fading the outer limits of the range. If I get caught with my pants down so to speak i am prepared to exit and take a loss on any position I have built up (by averaging down) on any successful BO top or bottom, and then double up and go in the correct direction getting my loss back in about 1/2 distance wise of the previous move I that caused my loss and likely will do even better riding the double up move for a profit. So there you go ....my perspective for Tomm. Game plan drawn. Waiting for the war to start. Bulls and bears.