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20 This is one of Ihe best trades I can make: A wide congestion followed by a pop, followed hy a narrow congestion. This tyj:ke of signal is valid on ariy rriajor or intcrmedime entry signah -> Uide conrrest Ion -> Vesterdays lou ->------ I I IfTj \ Karrou i] congest ion 1 Sell Optional sell ) at the breakout of yesterdays lou. It wouldnt haye nade any diTferencB as lo the direction of thn POP. It could haye lDoke< like this- ide - A / \/ V / flarrtia ->/\;V Sell the breakout of the narrouer cojijfestion ynreui with an optional sell \ at a breakout of the lou Horn a sujnmary of patterns: A gaf> above yesterdays high, bu! l>elow one or nuirt; of die past ffuee days liigfis: :ig 1 Day 2 4/\ ! Because, Tcdays ° retraceriEnt open ">A,/ into prior cajvgestlan !ifesterday s fiigh ->/vV4S/W j 3 rt gap, rptrncenerjt tlirongth cmiuestion, and then a breskout of the Iiiyhs, /VVSA Day 3 Day L V a BREAKOUT OF HIGH, Day 4 This Market traced to the nidde or tlirough tle prior congestion.
gap, retraccnent tfir-ough ilie coiigEstion tiEarest yesterdays lou, and a breakout of the cangestiDn. Ar> entry could also he Piide an a take-out of yesterdays low foUouiiiff iJie breakout of the congestion nearest tlie 1dm Day 1 Vesterdays lou -Sell of coiKjestion nsarest yoiiterdays Idu. A gap. a retracement to the highs of ih-e congestion nearest yesterdays fiigh Then congestion today and a breakout of todays congestion which is ckiser to yesterdays high than was yesterdays congestioic Trade the IneakotJi of the higher congestion d the two congestions are equaJ in si-e from top to bottom, Otherwise trade the breakout ot the tighter congestion. Yesterdays hvjh Day 3 <-Buy Breakout of conijrestion nearest yesterdays t)ay 2 Uliem [iricES open at a nEU liijili tlie last three ays: Gail open to a neu }u:)i far Hie last tbrtc days Mo retracerierit to aiiy prior cunfestioii of t)ie Ust three d<iys. HO . open io a new liiyh for the last tliree days. Retru.tTiont ta nid-lle cr bottow af any prior congest ion of the last three days, OK TO )*. /Gap open to a iu bigli far tlie last three days. / RetraccMcnt tlirout/h any congestioKi qf tlie last tbrt:e days with SLibsequeiit breakcxLt back in tliR dišticm of the gap opening. OK 0 THrtDE* Gap upen tq ncu jiiffh far tbe last three Jay, Retracement to niticik, boltorij or tbrouli aijy conjestion of tlie past three days. Ibis folloued by a coiitjestian of \\t] liitiglit today. TEftDE fi EiHLTiKouT OK THE iiicNKR OF THE -1:.1 \ Dn tlie rojersfi uf all these ulien <nin] shnrt,
If A congestion is riyJit at a preuiaus hih or lou, ihr.rc nust be retracenciii to at least tlie nlddlc of tlie congestion before trading the breakout. Breakout of yesterdays conaestion at tlie liigh. /AV SoMetincs the congestion iieftrest yesterdays hiyh cones totiay. Often, there is no gap. uaiit <n trade throu[jh the conjestion area no natter uhich side it is on relatiue to todays open. Sell tlie breakout at the cony est ion ar optionally sell a breakout oF the Igu . coiirfestions are eqiuil from top to - bottoHj trade a breakout of the one nearest the extrene. ions are unequal fren / \/\ < top to bottoMj trade breakout of the t itchiest one. Base on Base When ilierc ae iwo congesiions of Epproximately equal size irom top to boitoni. we want lo trade a breakout of the higher one when going long, and a breakout of tfie lower one when going shon. Tins will aMo"w us to avoid trading nito an ovojfiead resistance or vinderlying support area. However, if there are sufficient ticks separating the two congestion areas, it is OK to enter juy or seil orders with tfie onticipation of exiting witer prices reacfi tho second congestion area. Chnptcr 21 riniliii; the [Vend n [indiny tfie trend, I will begin with a theroe. This chapter shows one way to find a trend in its infancy - just as its being born. As the book progresses, Ill show variations of this theme, and build upon it. The variations exist in haw I count the bars. The variations are either more or less conservative. I have started witfi what is the most conservative nicthod here in this chapter using the S&P. I will cnC, several chapters from now, with what is tlic least conservative method, again, using a live rninuie SStP. The difference yields fewer (most conservative) or more [least conservaiivel trades. Vhat 1 show wilt lead step by step into segment counting. Take a good look at the chart on this page. SF 5 1 Wouldnt it fiave been fabulous to have caught such a nice trend in the S&P? Its really easy to look back at that trend and say, "1 could have made lots of money on that move," trcrtds are tho easiest thing in the world to spot when youre looking back at thorn. But is there a way to spot thom sooner? How could anyone have gotten into such a move early, maybe even ahead of everyone else? There is a way, and I will sfiow it on tfie following pages. First, iet me torn away all but tfie parts that we need to look at. Then, Ill enlarge the cfiart, so t can shovJ wliat I mean. : I u 1 ! 1 2 383 10 12 1 2 m 10 IZ 1 2 339 10 11 12 1 Z 39100 35050 35000 38 50 38500 38B50 38800 38750 3870G 38650 3G60G 38550 38500 38450 30100 3335G 333G0 3B2G0 3B150 38100 3B05G 38060 37950 37900 37B5G
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