Tight Bear Channel: Minor Reversal Lead to Major Reversal

Hi Yang,

I think the key line in Al's slide is "so minor reversal into TR is more likely than major reversal into bull trend". So Al is expecting a TR just like in your slide, but sometimes bulls get lucky and it turns into a trend soon enough, but that's a lower probability event (only 40% chance at best). The reason it's still a good pattern is because it has potential to go far to make it worth all the little losses from trying such setups over time. 

The trick is to catch these not too early (bull pressure needs to build first) and not too late (the market evolves into a protracted TR like in your slide). Once the market is in TR it's very difficult to breakout out of (due to market inertia) and Al advises scalping instead of swinging instead. 

Here are some thoughts about potential trade entries from your slide:

A) Broke bear trend and retested prior extreme but not enough bars yet (not enough bull pressure from many strong bull bars appearing).

B) Nested wedges and after tight bear CH like in Al's example. Unfortunately on your slide it didn't work this time and evolved into TR instead. 

C) HL after a bigger wedge. CC bull bars and a test of small gap with the LL bar, but now TR already so hope for strong move immediately, otherwise convert into scalp and get out for BE as best as you can.

D) Small bar low in TR after Wedge A,B,LL. Difficult due to 4 bar overlap so maybe wait for next bar to also be strong bull which it was. But again would be buying high in TR by that time.

Hope that helped,
CH
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