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As you can see in the image; bear trend is weak because of pullbacks overlapping BO points after bear BO and not many consecutive bear trends bars. So after the huge bull BO mkt is AIL, but I am concerned about the tops to the left.
My question is:
How do you decide that the mkt is actually in a bull trend and not just a bull leg in TR? And, how would you trade the scenario, that is; what conditions will make you go long and what will make you short the mkt?
There’s a few reasons to think this might break out:
- Bear channels are bull flags. They usually break to the upside
- The stairs pattern in the channel is weakening; each breakout below the prior swing low in the bear channel was less than the previous breakout
- The daily and weekly charts are in a strong bull trend.
- There’s an open gap with the prior swing high on the daily chart.
- The move happened on the open so probably sustained buying and trend resumption rather than vacuum. (Traps can happen on the open but the context seems right for a continuation rally here)
- The move originated from an area of support (yesterdays close, moving average - an ideal place to buy on the open)
- Prior day (last day of week) ended with a buy-the-close finish: weekly chart traders bought the market into the close. (they were glad of a discount and concerned about missing-out because of a gap up this week)
- The bar broke above 4 days of price action and lots of bear stop locations on several timeframes.
It is a huge bar on this timeframe so big risk. Buying above the second bar would be reasonable. It’s red but closes above the midpoint and is a H1 - a bull flag on smaller timeframe. Higher probability would be to wait for the follow through bar 3 with a stop below the bull flag (bar 2).
If I saw this bar racing up I’d probably switch to a smaller timeframe and buy closes.
Thanks for your detailed answer
