Video 09C: Pullbacks and Bar Counting
Endless pullback
1. If Pullback Keeps Growing: Maybe become opposite trent
Here is a Strong Bull Trend, and starting a pullback
The pullback is fairly tight bear channel.
This is a warning that the first reversal up probably will be minor!
And a very tight bear channel lasting 20 bars like this, this would be at least 40% chance, it could be a Bear Breakout into a Bear Trend.
In general, a bear trend inside of a bigger bull trend is a Bull Flag
Begin as a Pullback.
As it grows, it becomes more of a Trading Range.
Once it reaches 20 bars or more, I call it an Endless Pullback.
The probability of Resumption Up drops to 50%.
2. High 3: wedge bull flag pullback
Here, the Bull Flag Pullback:
It's a Tight Bear Channel.
Bull Pullbacks are small, only 1 bar each pullback, and very small bars
This reduces the probability of a Strong Resumption up.
It increases the probability of any Bull Breakout will be minor.
It leads to a continuation of the developing of a Trading Range, instead of a Resumption of a Bull Trend.
In general, whenever you see a Bull Flag, the chance of Bear Breakout is only 40%.
But once the Bull Flag grows to 20 bar or more, the chance Bear Breakout is 50%.
The Bear Breakout, with a good follow through, could become "always in short", and possible measure gap.
3. Bear Flag: Bull Breakout
Same as Bull Flag.
4. Endless Pullback in Bull Trend: a new Bear Trend
It will become a new Bear Trend.
Higher and lower time frames
1. 5 Minute TR: think about Higher Time Frame
Sometimes it's helpful to look at the higher time frame chart, to understand the trend clearer.
2. 5 Minute L1: think about lower time frame
Countertrend traders exit on High or Low 2
1. High 2: Strong Buy
If you are doing a short, in this Strong Bull Trend, H1, and then H2, you see the Market is against you twice, you gotta get out on High 2.
Same reason that why Buy Setup on H2 is good, because Bears will allow Market go against them one time, but not allow against second time. Bears will give up.
H2 is a 2nd attempt to resume Bull Trend.
Bulls will buy because it's a H2, and it's in a Bull Trend.
Bears also buy, because they need to exit short.
2. Low 2: Strong Sell
The L1 is not triggered, but there is a micro double top.
You can also call it 3 push wedge.
It's a 50% pullback in a strong bear trend.
Bulls tried to go up once, and second time. If the Market goes down, I want to get out.
Market tried twice still fail to break out.
It becomes a micro double top.
It's higher probability to have a resumption down.
Because nobody left to buy. Bulls tried twice, and failed twice.
This makes low 2 and higher probability to sell.
3. Exit Shorts If High 2 Triggers In Bull Trend
This is a Bull Trend with a Wedge Top.
Seems like it is good to sell
But it's also a High 2 Buy
But the Bull Channel in front was a strong tight channel. It's lo
Some Bears think it's a Strong Tight Bull Channel, now become a s Trading Range, so they will Short at the Wedge Top.
Some other Bears think, it's a Strong Tight Bull Channel, then a small pullback, then the bull trend continues. So they won't sell.
Bulls will buy, also the Bears will exit (buy), so the trend will resume up.
4. Exit Shorts If High 2 Triggers in Bull Trend
Suppose it is in a Wide Trading Range.
Bears see there is a micro double top, and will sell at the range top.
But Bears must be very careful, because:
It could be a 3 push Wedge Bull Flag
and there is a Gap still
Once the Bears see:
The Low of the Bull Signal Bar is 50% of the Bull Trend.
It's Two Leg Down with 50% pullback in the Bull Trend.
There is a Bull Signal Bar (pin bar)
It is a Bull Flag Wedge.
There is a H2.
Then the Bears see the H2, should exit 1 tick above H2.
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