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In Video 18F, slide 16, there's a clear BO of the TR (shaded), but has a terrible follow through even though it went on to successful BO. Al often talks about buying a BO with FT, so was it reasonable to buy at the close of BO bar? If so, does height of the close of BO bar dictate whether FT is important for a successful BO or not?
Another question is, how one can decide successful PB (which in this case was failing of failed BO) vs. just failed BO in which case one would not take H2 buy as it is at the top of TR?
Thanks!
Al often talks about buying a BO with FT, so was it reasonable to buy at the close of BO bar?
Yes! See Monday's EMINI as an example: bars 14, 32, 55 and 75 are all BOs that you can enter without waiting for the FT.
If so, does height of the close of BO bar dictate whether FT is important for a successful BO or not?
Yes, unless the BO is a big as the examples above, waiting for the FT increases the probability. In video 18F's chart you got a 50% PB before the trend resumed, other times you will get another big bull bar.
Another question is, how one can decide successful PB (which in this case was failing of failed BO) vs. just failed BO in which case one would not take H2 buy as it is at the top of TR?
This is the most important concept in trading. There are 8 videos in the BOs section precisely addressing this core concept (will the BO succeed or fail?). As a summary, you need to compare the strength of the move up with the strength of move down and decide which one is stronger. Yes, the FT was weak but it was also a bad SB for the bears in what was at that moment a tight bull channel with bulls having many bull bars, some of them consecutive and COH, coming from a wedge swing setup. This made the context good for a BO.
When it came, the BO bar closed above all the bars in the range and the PB, even tho it got 2 consecutive bear bars, they were small, stopped around the 50% PB of the BO and let the gap opened so when the bull bar closed on the high bears started to exit and they finally gave up on the BO PB 3 bars later, which was followed by another BO. Had the bears gotten a third bear bar COL, BO would have probably failed and bulls would have exited but precisely because of that, bulls bought the close of the second bear bar and the MKT turned up.
Al often talks about buying a BO with FT, so was it reasonable to buy at the close of BO bar?
Yes! See Monday's EMINI as an example: bars 14, 32, 55 and 75 are all BOs that you can enter without waiting for the FT.
As I understood, Bar 14 could easily have been a bull trap if the FT would have been a bear bar and a failed BO above the range with HH DT. But I get your point on bar 32, as it had a good sell setup after MM and DT.
If so, does height of the close of BO bar dictate whether FT is important for a successful BO or not?
Yes, unless the BO is a big as the examples above, waiting for the FT increases the probability. In video 18F's chart you got a 50% PB before the trend resumed, other times you will get another big bull bar.
In Video 18F slide 16, if there was FT it would have confirmed the BO, but PB with 4 bear bars, two COL as they were forming looked more like second leg trap with a good sell set up at the top of the range.
Another question is, how one can decide successful PB (which in this case was failing of failed BO) vs. just failed BO in which case one would not take H2 buy as it is at the top of TR?
This is the most important concept in trading. There are 8 videos in the BOs section precisely addressing this core concept (will the BO succeed or fail?). As a summary, you need to compare the strength of the move up with the strength of move down and decide which one is stronger. Yes, the FT was weak but it was also a bad SB for the bears in what was at that moment a tight bull channel with bulls having many bull bars, some of them consecutive and COH, coming from a wedge swing setup. This made the context good for a BO.
I may be wrong, but I saw sell setup on the PB with 4 bear bars with two closing on their lows, and still within TR. I am not suggesting it would become a bear leg, may be more TR, but wouldn't expect the huge bull trend that followed PB. If bulls were that strong, why they allowed PB with no bull bars?
When it came, the BO bar closed above all the bars in the range and the PB, even tho it got 2 consecutive bear bars, they were small, stopped around the 50% PB of the BO and let the gap opened so when the bull bar closed on the high bears started to exit and they finally gave up on the BO PB 3 bars later, which was followed by another BO. Had the bears gotten a third bear bar COL, BO would have probably failed and bulls would have exited but precisely because of that, bulls bought the close of the second bear bar and the MKT turned up.
This makes perfect sense, and you explained it beautifully!
Thanks always for your support.
As I understood, Bar 14 could easily have been a bull trap if the FT would have been a bear bar and a failed BO above the range with HH DT.
For 14 to become a trap 15 should have been a huge bear bar COL and below the EMA. This was unlikely. Study the differences between a succesful BO (14, 32) and a trap (44, 53).
The succesful BOs broke far beyond the EMA and prior S/R (prior H and L), closed on the very high and at the time they happened the swing traders where in a good trade (11H for the bulls and 25L or 31L for the bears), so good context for BOs.
On the other hand, 44 and 53 barely closed above EMA and next bars were bad FT below (not above!) resistance (35 start of channel, and 44 prior high, respectively), and the MKT was not likely to go up directly because the tightness of the channel down to 42.
In Video 18F slide 16, if there was FT it would have confirmed the BO, but PB with 4 bear bars, two COL as they were forming looked more like second leg trap with a good sell set up at the top of the range.
When you have a good swing setup at the bottom of a TR, you need to be opened to the posibility that the MKT will break out of the TR. It is always unclear and sometimes small details make the difference but if not at the BO, when the bull bar testing the BO point closed on the high the bears started to think that the BO was going to succeed and the die-hard bears exited above the BO PB, creating a give-up bar. So, yes, the bull trap was a possibility, but coming from a decent swing buy at the bottom of the TR and going up in a tight channel with consecutive bull bars closing on the high made the BO more likely than not. Once you see it closing on the high and well above all the bars in the range, you can buy it or wait for the BO test and enter.
If bulls were that strong, why they allowed PB with no bull bars?
Because life would be much easier! 🙂 But if you go to the encyclopedia, you will see all sort of succesful BOs with different FTs, including deep PBs that go below the BO low (bull case). You have to be opened to all the possibilities and change your mind bar by bar, if needed. In this case:
1. BO bar COH above TR --> tight channel up, good swing buy, possible TR BO
2. doji FT --> still BO but expect deeper PB
3. Bear bar COL --> Bears trying to make the BO fail, but need more
4. Consecutive bear bars --> Bears pushing, one more bar and possible another leg down likely before the MKT goes up, if it still goes up.
5. Bull bar COH, gap open, 50% PB so bears failed and can buy this bar or its BO PB a few bars later...
Thank you so much ludopuig, will refer to encyclopedia as suggested.
