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Al suggests that around the red circle, traders often decide that the market has exited the bull channel (which I agree with, given the break below the bull trend line) and is possibly entering either a trading range or a bear trend. When the market drops below a significant higher low, as indicated by the blue circles, traders generally believe that the bull trend has definitively ended. They anticipate that the lower highs may be the initial signs of a bearish trend, characterized by a series of progressively lower highs. My question is, could we alternatively draw a line (red line) and consider this as a broader bull channel, taking care to avoid consecutive lower highs and be open to the possibility of a reversal from a more extensive bullish channel?
@Mr.Carpet
Hi Sudeep,
What's interesting about this whole chart is it doesn't look great for bulls even on the way up. They kept getting bad FT after every BO higher on the way up (red arrows). And all the old TL attempts kept breaking (purple). Maybe the whole bull move is part of just a leg in big TR on some HTF. So the bear move now could also be part in that TR, especially since there was no clear bear spike to indicate start of trend. So there may be potential to look for buys if really is TR.
So if this whole chart is forming a big TR and the market is approaching the lower 3rd then it could be ok to start looking for buys. But we still have to respect the local formation. It looks pretty tight in bear move for now and PBs are small, so can call this some kind of local bear trend for now. Al recommends wider legs lasting 5-10 bars before starting two sided trading.
So it may be too early to look for buys in the bear move right now, until it gets much lower and legs become much wider. But to answer the actual question of whether to draw a shallower red TL if this is becoming a much broader bull CH, it may actually help to check HTF to see if some larger bull TL from prior days is fitting somewhere below.
Hope this helps,
CH
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