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88

And now for the reality;

BULLISH NEWS RELEASE

SBigCharts.com

AMAZON.COM (AMZN): DAILY BEARISH AB=CD

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100 80

40 20 0

Clearly, Amazon.com formed a distinct bearish pattem that reversed almost exactly off the completion ofthe AB=CD. Within the following few days, the stock plmnmeted, falling nearly 20 points.

These situations materialize frequently. It is important to "tmst the pattem" and ignore the news story. One way to look at such a situation is to ask yourself: "With all of the bullish news, how much better can it get?" After witnessing a few of these situations unfold, you will begin to realize that such news stories are contrarian indicators, especially when they coincide with very clear pattems.

A contrarian attitude helps separate the news from the facts. If you perceive goods news as an opportunity to sell and bad news as an opportunity to buy, you train your brain to think in a "buy low, sell high"



framework. A contrarian attitude is the same as utilizing the AB=CD framework. It is tough to think this way because your brain has been trained to associate good news as strength and bad news as weakness. Typically, a stock that is rallying nicely would be considered strong. Your brain will instinctively tell you to buy the strongest stocks and avoid the weakest. This is where the numbers come in to help you think outside the lines and interpret the price action from an unemotional perspective. When your brain is telling you one thing and the numbers suggest something different, it is crucial to maintain an unbiased perspective to be able to identify the best trade set-ups. Furthermore, it is essential to trust what the harmonic numbers are indicating. This trust will develop, as practical experience proves the validity of the numbers to be more reliable than good news items.



Sticking to the Plan

Stock Journal: Recording the Experience

It is very important to maintain a written joumal to keep track of potential trade set-ups. A stock joumal should include the type of pattem, the completion point of the AB=CD and the Fibonacci retracements within the reversal zone. Also, a written joumal is helpful in recording your personal thoughts regarding the relative price action within a reversal zone.

It is important, especially in the early stages of leaming these techniques, to keep track of your thoughts. The thoughts and ideas that are generated during the trade execution process are your personal signals that help gauge the price action. It is important to record your feelings and expectations relative to the current price action.

The key to trade execution of harmonic set-ups still requires to properly gauge the price action within the reversal zone. Achieving the "feel for the numbers" requires an understanding of your ovra personal signals. Your stock joumal will record your mental processes and trading behavior. It is only through such study that you will improve your executions and become a more successful trader.

I recommend that you "mock-trade" or "paper trade" for a few months to observe how these set-ups work out in actual examples. Throughout this book, I have provided many educational charts that show how the price action responds to the pattems and numbers. But, real experience is the best means to develop the feel for these techniques.

A stock joumal acts as the actual record of your trading behavior. There are many set-ups that are missed. It is easy to see these set-ups that



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