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Hy there, is this a reasonable trade (even though it didn't triggered)?
My doubt is if the more likely think to happen is the wedge bottom as I draw, or since the low of the day is a magnet and the chart was near the end is more likely to bet on a test of the low?
Hi Rodrigo,
There are a few considerations here. Before that, could I ask you to post a chart with bar count next time? It will make answering your questions much easier as I won't have to go back to my chart repeatedly to refer to the bar number.
First thing you need to understand is that the day is a TR day so it could very well be a 2nd leg trap but the 4 very strong bear bars are following a DT from bars 56 and 64. So, it is a BO of a DT so although it reached the MM target from that DT, it is a little more likely to get some more down before the W you are talking about or you can look at it as an ET attempts to take control.
The second thing is, the SBs on both cases were not good. The first being a doji and the second one having a prominent tail. At this point, I would not bet on a 2nd leg trap, especially so close to EOD.
Third point being, even if it turns out to be a 2nd leg trap, those 4 bars were strong bear bars. So, it is not expected that the bulls will suddenly start getting strong bull bars. They will probably get a bull channel(in most cases, weak). So, if you're so close to the EOD, do you really want to bet on a long that does not have a big potential reward where the probability is also low? Close to the EOD, most traders usually look for a BTC/STC finish. Here, none got one as no such setup arose.
Finally, the bulls needed to show they are taking control of the market. So, even if bar 71 bear bar had a big tail on the bottom, it is still fairly strong. This does not show the bulls are in control. Best the bulls can get here is a TR.
So, for all these reasons - I think the market trying to touch the LOD might have been a slightly higher probability event than the W working(which it eventually did the next day once the bears eventually lost control).
Hope that helped?
Hi Abir, yes it helped a lot.
Thanks!!! 👍
Good explanation my dear Abir. Learnt a lot from your reply. Thanks.
