Exhaustion or BTC

I would like to think in terms of Probabilities.

First figure out the mkt structure

1. Gap Down and Sell Climax 

2. Followed by Small PB bull Trend

3. Then TR.

That's is what mkt is doing so far.

What's mkt is doing now?

It is break out of Trading Range. 

How did the BO happen?

By forming Triangle at the top of TR.

Where does MA doing here?

Mkt has been rejected by 60 min MA for 3 or 4 times but did not go farther down (only went down for a scalp but not much.

Bears could not able to put CSC bear closes with good body below the 20 MA but bulls can do.

That big final bull closes above high of last 30 bars.

Let's talk about Prob here.

TR BO has high failure rate like 70% or more.

But this is a strong bull bar, so prob of failure is much less than 70%. 

Let's time of the day.

If it is late in the day, then it is difficult to achieve swing profit. In general, traders buy at the top of TR for swing not for scalp because of low prob. However, late in the day, mkt may not have a time to swing. 

Give such situation,  I would wait for confirmation  ( wait and see if next bar is bull bar). 

If bulls manage to do get bull FT, then this would become

Reason 1: CSC bull bar over 60 min EMA 

Reason 2: CSC bull bar over TR 

You get bare minimum 2 reason to take the trade. 

Speaking of Exhaustion.

Exhaustion happens if trend last for many bars. Here you are in TR for last 30+ bars. Mkt two sided for you for last 30 Bars.

Trade Entry and Management.

If I see a bull FT, I would buy with stop order. i would be super cautious about sudden reversal as you are late in the day. Once mkt goes on my way, I move SL to BE and trail the stop for every new bar. My PT is scalpers PT. Swing has low prob late in the day.

Thanks for your input.  I almost always wait for follow through on breakouts, but occasionally there's a relatively strong BO bar that makes me want to go ahead and take the trade before the FT.  The fear is that I'll miss the best entry if the follow through bar is too big to make the traders equation work based on the MM target. Perhaps looking for an earlier entry on a smaller time frame is a good way to enter if the BO bar is relatively large with a decent gap above the BO point and don't want to wait for FT bar to close.

Hi Kevin, BN, my 2c - could be wrong

in my opinion - a measured move seems more likely. an exhaustion gap would have been more probable had you gotten a huge bull bar breaking outside the channel to some resistance or measured move targets. 

Thanks Mike.  Your markup looks reasonable.  I see you have your buy zone above the big bull trend bar.  That makes sense looking for a 1:1.  I would take that trade, but typically I wait for a follow through bar.  Problem is sometimes the follow through closes above that buy zone, so the 1:1 diminishes to more of a 70 or 80% probability scalp.  I don't usually take those.  So I would either miss the trade or hope for a pullback to the 1:1 area.  I wonder if there's another approach, like look at a STF for an early entry during the follow through bar before it closes.

Also, if you take a look at the bull leg preceding the big trend bar (in the rectangle on the chart below) you can see there's at least 3 pushes up in a weak bull rally, which is a possible wedge  top formation and the big bull trend bar is over 30 bars from the start of that bull leg.  This is where I worry of exhaustion.  With a follow through bar, I would still take the long trade though.

My suspicions of a trap appear to be materializing.  Looks like a short under that last bear bar.  Good chance of a give up bar from bulls exiting longs?

Kevin, yeah indeed  ... it's by the look of it now at 50% pullback - anything can happen 🫡

it seems to be a pullback from a triangle breakout and also pullback post 3 major legs up - broader context seems to be a broad bull channel - anyway chart is still Always in Long till there is a strong bear breakout 

Hi Kevin, this is what I see. It looks to me like a both a buy climax & channel overshoot. A bull BO of a bull channel has a 75% chance of failing & would retrace to the bottom of the channel. However, the TBTL correction looks like the bears are not able to reverse the market & the bull gaps are open which makes me think that the bulls are somewhat stronger for now

Thanks Satya for your input.  I think based on the chart at that time, it's reasonable to assume broad bull channel, which means we can sell at the top and buy at the bottom similar to trading range.  And since the legs are wide enough, stop entries for scalps and swings should work.

I agree on the buy climax and channel overshoot. I ended up shorting the close of the last bear bar in my last image post.  Even though there were open bull gaps, I figured they would close due to the climax and the bear microchannel down to my entry. Took profit at 1:1.

Congrats on the winning trade!

i was following the 1 hour chart on MBT - after a point it gave a strong bear BO - so i guess the buy climax conclusion proved to be correct. Congrats Kevin for a winning trade - well spotted and deserved

This is not a head and shoulders... Price should descend from above into an inverse head and shoulders but in this case it's coming from below.

As for whether it's a breakout or not.... There's obvious targets to the left. A gap fill, and the top of a sell climax.... you would expect price to be vacuumed to these levels and so you should be thinking vacuum and not breakout.

furthermore, breakouts need confirmation. this would usually be a breakout bar plus a follow-through bar. You don't have any follow-through yet in your screenshot.

The follow-through bar is a pretty fundamental concept for trading breakouts. So if you're not aware of this you need to review the course contents on the topic.

Even with a follow-through bar I would want to see more in this case. Given how big the range is and the resistance to the left.

Postado por: mike

↑

Hi Kevin, BN, my 2c - could be wrong

-- attachment is not available --