al-brooks-course
06 - 3 Patterns Every Trader and Investor Should Know
Raw transcript and slide notes for 06 - 3 Patterns Every Trader and Investor Should Know.
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Transcript 001
Time: 00:02
Bilingual Transcript
00:02 - 00:03
EN: Hi, I’m Al Brooks.
00:03 - 00:06
EN: This is a bonus video to the Brooks Trading Course.
00:06 - 00:08
EN: I want to talk today about three patterns
00:08 - 00:11
EN: that every trader and every investor should know.
Slide 001
Time: 00:13
Bilingual Transcript
00:14 - 00:18
EN: I want to begin by talking about my definition of price action.
00:18 - 00:24
EN: It’s basically any movement that you see on a chart, and the three patterns are,
00:24 - 00:29
EN: first, a strong bull trend; a pullback in a bull trend;
00:29 - 00:34
EN: and then Wedge reversals – either a Wedge reversal bottom or a Wedge reversal top.
00:34 - 00:38
EN: And then I have a little slide at the end about my two websites.
00:40 - 00:45
EN: First I want to begin by talking about what I think price action is.
Slide 002
Time: 00:46
Bilingual Transcript
00:47 - 00:51
EN: This is a weekly chart of one of the biggest companies in the world.
00:51 - 00:55
EN: The blue line is the 20-bar Exponential Moving Average.
00:55 - 00:59
EN: As you see, I removed the price axis and the time axis.
01:00 - 01:04
EN: Price action is simply market behavior.
01:11 - 01:14
EN: The reason why traders look at price action
01:14 - 01:18
EN: is because they’re hoping that it repeats.
01:19 - 01:22
EN: Every chart that you see is simply a record of transactions
01:22 - 01:26
EN: between buyers and sellers, and a price action trader is looking for patterns,
01:26 - 01:30
EN: hoping for clues as to what will happen next.
01:31 - 01:35
EN: Price action is just a map of rational human behavior,
01:36 - 01:40
EN: and there are many variations of it, and an experienced trader
01:40 - 01:45
EN: can see different variations of the same patterns repeat over and over.
01:45 - 01:49
EN: This is true for every market and every timeframe, and it always has been true.
01:49 - 01:53
EN: I’ve looked at charts back from over 100 years ago, and if I remove the time
01:53 - 01:59
EN: and the price, I cannot tell if the chart is today or 100 years ago,
01:59 - 02:02
EN: and I cannot tell if it’s Apple or gold or crude oil,
02:02 - 02:05
EN: and I am a very experienced price action trader.
02:06 - 02:10
EN: The point is, I trade all markets and all timeframes the same,
02:10 - 02:12
EN: as do all experienced traders.
02:13 - 02:17
EN: I remove the labels so that you don’t get distracted
02:17 - 02:20
EN: and focus simply on the price action.
Slide 003
Time: 02:25
Bilingual Transcript
02:30 - 02:32
EN: If you watch any business TV show,
02:32 - 02:36
EN: you’ll see charts of different timeframes in different markets.
02:36 - 02:39
EN: It might be an hourly chart, might be monthly chart.
02:39 - 02:42
EN: You never hear anyone say that “This is a weekly chart,
02:42 - 02:46
EN: and therefore I’m going to trade it differently from an hourly chart,”
02:46 - 02:49
EN: and you never hear them say, “This is Apple,
02:49 - 02:54
EN: and therefore I have to trade it differently from how I trade gold or crude oil.”
02:54 - 02:58
EN: That’s because traders correctly believe that price action
02:58 - 03:02
EN: is simply rational human behavior, and therefore it’s going to be the same
03:02 - 03:05
EN: on all timeframes and for all markets.
03:05 - 03:08
EN: That has always been the case and it always will be the case.
03:08 - 03:13
EN: Yes, computers alter the speed of things, but they do not change
03:13 - 03:19
EN: the fundamental principle that price action is a reflection of rational behavior,
03:19 - 03:21
EN: and the computers trade rationally.
03:21 - 03:23
EN: Although sometimes they appear irrational,
03:23 - 03:27
EN: everything they are doing is consistent with rational transactions.
Slide 004
Time: 03:30
Bilingual Transcript
03:34 - 03:38
EN: There are lots of patterns, and I want to talk today about three
03:38 - 03:41
EN: of the most common, and therefore three of the most important.
03:45 - 03:49
EN: For example, here, obviously the market’s starting in the lower left,
03:49 - 03:50
EN: going to the upper right.
03:50 - 03:54
EN: It’s a bull trend, and when the bull trend is very strong – by strong,
03:54 - 03:58
EN: I mean Tight Channel, pullbacks are small and brief
03:58 - 04:02
EN: – that is a very strong bull trend and traders should only look to buy.
04:03 - 04:06
EN: You can see there are several bars closing on their highs
04:06 - 04:09
EN: and closing above prior highs, so those are all breakout bars.
04:09 - 04:13
EN: If you looked at a higher timeframe chart, this would simply be a series
04:13 - 04:16
EN: of big bull trend bars with no bear bars and no pullbacks,
04:16 - 04:19
EN: and therefore it’s a breakout on a higher timeframe chart;
04:19 - 04:23
EN: therefore, even though you can see reversals and bear bars,
04:23 - 04:25
EN: you should only be looking to buy.
04:28 - 04:31
EN: Here, this bar went below the low of that bar,
04:31 - 04:33
EN: so we have a pullback in the trend.
04:33 - 04:37
EN: I want to talk about buying pullbacks in bull trends.
04:37 - 04:39
EN: Again, you should only look to buy.
04:42 - 04:44
EN: We got three legs down, reversal up.
04:44 - 04:47
EN: We have three legs up and reversal down.
04:47 - 04:54
EN: This is a Wedge bull flag, a Wedge Bottom in a bull trend, and this is a rally.
04:54 - 04:57
EN: It’s forming a Double Top, but it’s a Wedge and it’s a top.
04:57 - 05:00
EN: So traders will look to sell a reversal down.
05:03 - 05:06
EN: First I want to begin by talking about a strong bull trend.
Slide 005
Time: 05:07
Bilingual Transcript
05:09 - 05:12
EN: Again, the blue line, a 20 bar Exponential Moving Average.
05:12 - 05:15
EN: This is an extremely strong bull trend.
05:15 - 05:17
EN: We have a 1 bar pullback.
05:17 - 05:20
EN: We went sideways for a few bars, but the pullbacks are small.
05:20 - 05:25
EN: It’s a Small Pullback Bull Trend, one of the strongest types of bull trends.
05:29 - 05:31
EN: Pullbacks are small and brief.
05:31 - 05:36
EN: Sometimes you go sideways for several bars, but the pullbacks are still small.
05:41 - 05:43
EN: You should only look to buy.
05:43 - 05:46
EN: It’s unusual, and therefore it’s unsustainable.
05:46 - 05:48
EN: It’s a Buy Climax.
05:48 - 05:51
EN: However, Buy Climaxes can last a long time,
05:51 - 05:56
EN: and this one lasts a lot of bars – in fact, the entire day is basically a Buy Climax.
05:56 - 06:00
EN: Because they can last a long time, traders should only look to buy.
06:00 - 06:03
EN: If you looked at a higher timeframe chart – for example,
06:03 - 06:06
EN: let’s say this is a 5-minute chart and you looked at a 15-minute chart
06:06 - 06:10
EN: – it would simply be a series of bull bars with no pullbacks,
06:10 - 06:13
EN: and that’s true if you look at a 30-minute chart or an hourly chart.
06:14 - 06:17
EN: Therefore, if it’s so strong that there are no pullbacks
06:17 - 06:20
EN: on the next higher timeframe, on this timeframe,
06:20 - 06:21
EN: you should only be looking to buy.
06:24 - 06:25
EN: How do you buy?
06:25 - 06:30
EN: Well, the easiest thing is you look for a bull bar closing on or near its high,
06:30 - 06:35
EN: and you simply buy using a stop above the high of the bar.
06:35 - 06:37
EN: Where do you put your protective stop?
06:37 - 06:38
EN: Initially at the bottom.
06:46 - 06:49
EN: A lot of traders look at it and say, “Oh my gosh, I did not buy.
06:49 - 06:52
EN: I should’ve bought here, I should’ve bought here, and now we’re up here.
06:52 - 06:53
EN: What do I do?
06:53 - 06:55
EN: I don’t want to miss the trend.
06:55 - 06:58
EN: Maybe I should wait for a pullback.” But if you wait for a pullback,
06:58 - 07:03
EN: you’re going to miss a lot of the trend, and you’ll be buying up here or up here.
07:03 - 07:07
EN: The easiest thing to do is look at where the stop has to be,
07:07 - 07:12
EN: decide how much risk it is, and then trade a position that allows you
07:12 - 07:16
EN: to not risk any more on the trade than you would on any other trade,
07:16 - 07:20
EN: and simply buy using a stop above the high of the prior bar.
07:21 - 07:25
EN: Another way to do it is simply buy calls or call spreads.
07:25 - 07:28
EN: For example, if this is a daily chart or weekly chart,
07:28 - 07:32
EN: you might simply want to buy a call or buy call spreads.
07:36 - 07:40
EN: After every new strong leg up, you raise the stop
07:40 - 07:43
EN: to below the bottom of the most recent strong leg up.
07:43 - 07:45
EN: Here we have 2 or 3 bull bars.
07:45 - 07:48
EN: At this point you’d raise the stop to that.
07:48 - 07:50
EN: Here we’re starting to rally again,
07:50 - 07:53
EN: so somewhere in here you would raise the stop here.
07:53 - 07:55
EN: And that’s true no matter where you bought.
07:55 - 07:58
EN: If you bought here, if you bought here, if you bought here
07:59 - 08:02
EN: and you’re still long, at this point your stop is here.
08:02 - 08:08
EN: So had you bought down here and now it’s up here and you get stopped out,
08:08 - 08:10
EN: you’re going to end up with a very big profit.
08:10 - 08:14
EN: But your stop has nothing to do with where you enter.
08:14 - 08:18
EN: Your stop has simply to do with what the market has been doing,
08:19 - 08:22
EN: and no matter where you buy, if the market is up in here,
08:22 - 08:24
EN: your stop is going to be here,
08:24 - 08:27
EN: and after every strong breakout you raise your stop.
Slide 006
Time: 08:30
Bilingual Transcript
08:30 - 08:35
EN: Lots of bars with bear bodies, lots of bars with prominent tails.
08:35 - 08:36
EN: It never looks like it’s going to last.
08:36 - 08:40
EN: It always looks like it’s about to enter a Trading Range or reverse,
08:40 - 08:45
EN: but the pullbacks are small – 1 bar, 2 bars, 2 or 3 bars, 4 bars.
08:45 - 08:46
EN: Sideways.
08:46 - 08:51
EN: They don’t go down very deep, and you know that this is going to be
08:51 - 08:53
EN: a strong breakout on a higher timeframe,
08:53 - 08:57
EN: and therefore on this timeframe, you should only look to buy.
08:57 - 09:00
EN: You have to be confident that the market’s going to go higher.
09:06 - 09:07
EN: Also, look at this.
09:07 - 09:10
EN: We’re pulling back, and look to the left.
09:10 - 09:11
EN: It held above a breakout point.
09:11 - 09:16
EN: We have a breakout here, a bull bar closing on its high, closing above that high,
09:16 - 09:19
EN: so it’s a breakout, and the pullback stayed above that high.
09:19 - 09:23
EN: Here we have a breakout, more breakout, and we tried to reverse down,
09:23 - 09:25
EN: but we could not get below the breakout point.
09:26 - 09:28
EN: So there were several gaps on the way up.
09:29 - 09:33
EN: Here we have a pullback below the breakout point, but the bodies do not overlap.
09:33 - 09:38
EN: The bodies of the pullback bars do not overlap the bodies here.
09:38 - 09:43
EN: So that means this is a gap, but it’s a Body Gap – a gap between the bodies.
09:43 - 09:46
EN: And if this was a line chart, you’d see an actual gap
09:46 - 09:50
EN: because the line chart corresponds to the closes of the bars.
09:50 - 09:53
EN: It ignores the tails, and there still would be a gap here
09:53 - 09:56
EN: and therefore it’s still a sign of strength.
09:56 - 09:59
EN: Strong bull trend, and therefore you should only buy.
09:59 - 10:02
EN: The bulls are so eager to buy, they don’t expect it to fall
10:02 - 10:06
EN: below the last breakout point, and therefore you should only be looking to buy.
10:10 - 10:16
EN: All bull trends, every strong bull trend, is constantly forming tops.
10:16 - 10:19
EN: The most common one that you’ll see will be Wedge Tops,
10:19 - 10:22
EN: and there are all kinds of ways to draw Wedge Tops.
10:22 - 10:26
EN: But if you look at the chart and you conclude it’s a Small Pullback Bull Trend,
10:27 - 10:29
EN: you should ignore the Wedge Tops.
10:29 - 10:31
EN: You should assume that every one of them will fail,
10:31 - 10:35
EN: become a bull flag, and lead to a resumption of the bull trend.
10:35 - 10:39
EN: So do not worry about all the Wedge Tops and do not look at the Wedge Tops,
10:39 - 10:41
EN: because you know the trend is strong.
10:41 - 10:43
EN: You should only be looking to buy.
Slide 007
Time: 10:45
Bilingual Transcript
10:49 - 10:50
EN: You should buy for any reason.
10:50 - 10:53
EN: I said the easiest way to do it is simply look for a bull bar
10:53 - 10:55
EN: closing near its high, buy above the high of the bar.
10:55 - 10:59
EN: Bull bar closing near its high, buy with a stop above the high of that bar.
10:59 - 11:00
EN: Same here.
11:00 - 11:02
EN: Buy with a stop above the high of that bar,
11:02 - 11:05
EN: and you just do that all during that trend.
11:07 - 11:09
EN: You don’t have to take every buy.
11:09 - 11:13
EN: A scalper will keep buying, taking profits, buying,
11:13 - 11:15
EN: taking profits, and repeatedly trade that way.
11:15 - 11:20
EN: But most traders will find themselves taking the first or second buy
11:20 - 11:23
EN: and then not taking any more, and they miss the whole trend.
11:24 - 11:28
EN: So once you think it might be a Small Pullback Bull Trend, look to buy and hold.
11:28 - 11:30
EN: Rely on your stop and hold.
11:30 - 11:34
EN: If you’re a day trader, one of the things I tell people to do
11:34 - 11:37
EN: if they find themselves scalping out is to go to Walmart.
11:38 - 11:39
EN: Go away for a couple hours.
11:39 - 11:41
EN: You know where your stop has to be,
11:41 - 11:43
EN: so if you buy above this bar, your stop is here.
11:43 - 11:48
EN: Just put your stop down there and go to Walmart and come back in an hour or two,
11:48 - 11:51
EN: and you’ll find that you made a lot of money.
11:51 - 11:54
EN: In addition to buying above the high of the prior bar,
11:54 - 11:58
EN: you can also simply buy at the close of any big bull bar closing near its high.
11:58 - 12:00
EN: How do you do that?
12:00 - 12:03
EN: As soon as the bar closes, you can just hit “Buy the Market.”
12:04 - 12:08
EN: Or what you could do is as soon as the bar closes, place a limit order
12:08 - 12:11
EN: to buy the close of the bar, and you get filled on the next bar.
12:11 - 12:14
EN: In general, it’s better to buy at the market
12:14 - 12:17
EN: because sometimes it will not come back to your limit order,
12:17 - 12:18
EN: and you will not get filled.
12:22 - 12:26
EN: Remember, the market’s in a bull trend, and every reversal attempt will fail,
12:26 - 12:31
EN: so another thing you can do is just look for a bear bar closing near its low,
12:31 - 12:33
EN: and as soon as you see it, you buy the close.
12:33 - 12:35
EN: You buy the close of the bear bar.
12:35 - 12:38
EN: So right as soon as that bear bar closes, you buy the market.
12:38 - 12:39
EN: You just buy at the market.
12:42 - 12:46
EN: The market has been above the average price for 30, 40, 50 bars.
12:46 - 12:48
EN: Well, that means bulls have been very eager to buy.
12:48 - 12:53
EN: They have been willing to pay an above average price for all of those bars.
12:53 - 12:58
EN: When they finally get a chance to buy at the average price, they’ll take it,
12:58 - 13:01
EN: so you can place a limit order to buy at the Moving Average.
13:01 - 13:04
EN: Or as soon as it hits the average, you buy at the market.
13:08 - 13:13
EN: Another thing to do is every time you see a bar, you place a limit order
13:13 - 13:16
EN: to buy at its low, thinking that the reversal will be small.
13:16 - 13:18
EN: It’ll be a small pullback.
13:18 - 13:20
EN: This is especially good if you have a bull bar.
13:20 - 13:24
EN: So any time you see a bull bar, you place a limit order to buy at its low.
13:25 - 13:27
EN: And bear bars you can do that as well,
13:27 - 13:30
EN: especially bad sell signal bars like a doji like that.
13:30 - 13:34
EN: Here’s another bull bar, so you can place a limit order to buy at its low.
13:39 - 13:42
EN: And as I said, every time you see a bull bar closing near its high,
13:42 - 13:46
EN: you simply place a stop order to buy just above the high of the bar.
13:47 - 13:50
EN: The idea is to get long and stay long.
13:50 - 13:54
EN: You buy for any reason in here, put a stop down here,
13:54 - 13:58
EN: and you don’t get out until there’s a logical reason to get out,
13:58 - 14:02
EN: because these small pullbacks bull trends can last a long time.
14:06 - 14:08
EN: Every new breakout, you raise the stop.
14:08 - 14:11
EN: No matter where you bought, you raise the stop.
14:11 - 14:14
EN: So any time in here, the stop is down here.
14:14 - 14:17
EN: Any time in here, no matter where you bought,
14:17 - 14:21
EN: the stop is here below the bottom of the most recent breakout.
14:27 - 14:30
EN: There’s often profit-taking late in the trend.
14:30 - 14:33
EN: Therefore, it’s reasonable to get out if you want,
14:33 - 14:36
EN: but the odds are it’s still a Small Pullback Bull Trend.
14:36 - 14:38
EN: The odds are it’s not going to go down very far,
14:38 - 14:41
EN: and bulls will buy that low and buy more lower.
14:42 - 14:44
EN: But it’s okay to take profits.
14:44 - 14:49
EN: You can always buy again above a bull bar, above that bar or above this bar
14:49 - 14:51
EN: or above any of these bull bars.
14:55 - 14:58
EN: You can always buy again above the high of a bull bar.
15:01 - 15:03
EN: A pullback in a bull trend.
15:03 - 15:05
EN: This is the second pattern.
Slide 008
Time: 15:06
Bilingual Transcript
15:08 - 15:12
EN: We were drifting sideways and we had a huge, major Surprise Bar,
15:12 - 15:14
EN: bull major surprise and follow-through.
15:14 - 15:20
EN: So clearly, a strong bull trend, and the first time the low of a bar
15:20 - 15:23
EN: is below the low of the prior bar, you have a pullback,
15:29 - 15:32
EN: and traders will bet the bull trend will resume.
15:32 - 15:36
EN: One way to enter is you place a buy stop 1 tick
15:36 - 15:39
EN: above the high of that pullback bar.
15:42 - 15:47
EN: I call that a High 1, so it’s the first attempt to resume up.
15:47 - 15:52
EN: Sometimes you get a Lower High and a second attempt, and that would be a High 2.
15:52 - 15:56
EN: Sometimes you get three legs down and a resumption up.
15:56 - 15:59
EN: That could be a High 3 or a Wedge bull flag.
15:59 - 16:02
EN: Sometimes it’s sideways, and it can be a Triangle.
16:02 - 16:07
EN: But the first pullback that resumes up is a High 1 buy signal.
16:10 - 16:14
EN: Stop very far away, so you have to put your stop down here.
16:14 - 16:19
EN: If your account is too small to risk that much, you do not take the trade.
16:19 - 16:23
EN: Or if you’re trading, for example, Eminis, you could always trade a Micro Emini.
16:23 - 16:28
EN: If you’re trading a stock, instead of buying 1,000 shares, you buy 100 shares.
16:28 - 16:30
EN: Or you can even buy 10 shares.
16:31 - 16:35
EN: Forex market, you obviously can take any size position.
16:39 - 16:41
EN: After every breakout to a new high,
16:42 - 16:45
EN: you raise the stop to below the bottom of the most recent leg up.
16:46 - 16:49
EN: If you have three or more consecutive High 1s,
16:49 - 16:53
EN: this is an exceptionally strong bull trend.
16:53 - 16:56
EN: This is very unusual, to have a series of High 1 bull flags like that.
16:56 - 16:58
EN: This is a very strong bull trend.
Slide 009
Time: 17:00
Bilingual Transcript
17:06 - 17:07
EN: Here we have a bull trend.
17:07 - 17:11
EN: It’s a bull leg in a Trading Range, but it’s also a Small Pullback Bull Trend.
17:11 - 17:15
EN: We’re getting a reversal up, so that is a High 1 buy signal bar,
17:15 - 17:18
EN: and it triggered when we went above the high of the bar.
17:18 - 17:20
EN: For me, I would not take that buy.
17:20 - 17:22
EN: We have 3 bear bars and a doji bar.
17:22 - 17:24
EN: This is a low probability buy.
17:24 - 17:28
EN: The bear trend continued down, and now we have a second reversal up.
17:28 - 17:30
EN: This would be a High 2.
17:30 - 17:33
EN: This would have a higher probability of profit.
17:33 - 17:36
EN: Before making a new high, we reversed down a third time,
17:36 - 17:39
EN: so you could call this a High 3.
17:39 - 17:40
EN: I would not.
17:40 - 17:42
EN: I would call this a big complex pullback.
17:42 - 17:48
EN: So this would be a larger High 1, subdividing into two pieces.
17:48 - 17:52
EN: The bull trend tried to resume, and then we had another small couple legs down.
17:52 - 17:57
EN: So for me, I would look at this as a complex High 1 with two parts to it,
17:57 - 17:59
EN: and then a High 2 over here.
17:59 - 18:02
EN: It doesn’t matter how you label it.
18:02 - 18:07
EN: What matters is it’s still a bull trend, and it should be resuming.
18:07 - 18:11
EN: You’ve got to be looking to buy above a bull bar closing near its high.
18:16 - 18:18
EN: 5 bars without a bull body,
18:18 - 18:21
EN: so this is not a very strong buy signal despite the bull body.
18:22 - 18:26
EN: So it’s a weak High 2, so that means maybe we’ll get a High 3.
18:26 - 18:29
EN: Or the first reversal up will fail, be a bull trap,
18:29 - 18:32
EN: you’ll get a Lower High, and then a second leg down.
18:35 - 18:36
EN: This is what I was talking about.
18:36 - 18:39
EN: You can view this as a complex High 2.
18:39 - 18:44
EN: We subdivided into High 1, High 2, and it became a larger High 1,
18:44 - 18:47
EN: and then we got a second leg down to a larger High 2.
18:47 - 18:49
EN: It’s still a Higher Low in a bull trend.
18:49 - 18:53
EN: It’s still trying to hold above the Moving Average.
18:56 - 18:58
EN: I would not take that High 1 buy.
18:58 - 19:00
EN: Personally, I would not take this High 2 buy.
19:00 - 19:03
EN: But this is a larger complex High 2.
19:03 - 19:08
EN: I would take that or buy above these other bull bars closing near their highs.
Slide 010
Time: 19:10
Bilingual Transcript
19:11 - 19:13
EN: A rally and a pullback.
19:13 - 19:16
EN: This is a High 1 buy signal.
19:16 - 19:18
EN: A new high in the rally, another pullback.
19:18 - 19:21
EN: Another High 1, another new high.
19:21 - 19:24
EN: A pullback, another High 1 above that bar.
19:25 - 19:28
EN: It filled, and we got another leg down,
19:29 - 19:31
EN: but your stop is still probably down here,
19:31 - 19:33
EN: the bottom of the most recent breakout.
19:33 - 19:36
EN: So theoretically if you took that buy, you’d have to allow for the possibility
19:36 - 19:40
EN: of one or two more legs down, stop below here or below here,
19:40 - 19:42
EN: and then we resumed up here.
19:42 - 19:45
EN: You could either buy above that or wait to buy above that.
19:45 - 19:50
EN: Here’s a High 1, but only a small bull doji, and we have a bear bar here,
19:50 - 19:52
EN: another bear bar here, not all that good.
19:52 - 19:56
EN: This is higher probability, but it’s a pretty Tight Bear Channel,
19:56 - 20:00
EN: so I would wait for a better buy setup or wait
20:00 - 20:02
EN: for a breakout and then buy after the breakout.
20:02 - 20:05
EN: Here we tried to get a High 3 but did not trigger.
20:05 - 20:07
EN: This did not go above that.
20:07 - 20:10
EN: And now we have a High 3, so you can draw a line along the bottom
20:10 - 20:15
EN: – one, two, three – and this selloff is a Higher Low.
20:15 - 20:17
EN: I would call it a Wedge bull flag.
20:17 - 20:19
EN: I would not buy above the doji,
20:19 - 20:22
EN: but I think buying above that or above that is pretty good.
20:26 - 20:30
EN: We have a High 2 bull flag, but it continued down.
20:36 - 20:40
EN: Therefore, I would call it a Wedge bull flag and a High 3.
20:40 - 20:43
EN: I would rather buy above a bull bar closing near its high.
20:43 - 20:45
EN: That is a higher probability buy.
20:45 - 20:49
EN: And your initial stop is here, but once you start breaking out,
20:49 - 20:54
EN: either once you’re here or here, you move your stop to below this bar.
Slide 011
Time: 20:57
Bilingual Transcript
21:03 - 21:08
EN: I talk about High 1, High 2, and High 3 patterns as pullbacks,
21:08 - 21:11
EN: either in a bull trend or in a Trading Range.
21:11 - 21:14
EN: If the market’s in a Trading Range and you have a swing down
21:14 - 21:18
EN: that has two legs in it, it would be a High 2 buy signal bar.
21:19 - 21:24
EN: Today when I’m talking about pullbacks, I’m talking about strong bull trends.
21:24 - 21:29
EN: I’m not talking about buying pullbacks in Trading Ranges or in weak bull trends.
21:29 - 21:33
EN: As far as a high probability setup for traders,
21:33 - 21:36
EN: it’s better to look for a strong bull trend
21:36 - 21:39
EN: and then look to buy a High 1 or High 2 bull flag.
21:39 - 21:43
EN: Pretty strong bull trend – High 1 here, High 2 here.
21:43 - 21:44
EN: Pretty strong bull trend.
21:44 - 21:46
EN: We tried to trigger a High 1 here.
21:46 - 21:49
EN: Did not trigger, so you could call this a High 1.
21:49 - 21:52
EN: On a smaller timeframe, it probably did trigger and it’s a High 2,
21:52 - 21:55
EN: but on this timeframe, this is a High 1.
22:00 - 22:02
EN: We have a big gap up.
22:03 - 22:05
EN: Two pushes down – one, pullback, two.
22:05 - 22:07
EN: You could call this a High 1.
22:07 - 22:10
EN: On a smaller timeframe chart, it’s two legs down.
22:10 - 22:11
EN: It could be a High 2.
22:11 - 22:13
EN: But on this chart, it’s a High 1.
22:13 - 22:16
EN: Not great buying above a bear bar and a doji bar,
22:16 - 22:19
EN: but that is a High 1 pullback after a big gap up.
22:22 - 22:24
EN: This bar, it’s a pullback.
22:24 - 22:28
EN: It did not go below the low of the prior bar, but it’s a pause.
22:28 - 22:29
EN: It’s an inside bar.
22:29 - 22:34
EN: Its high did not go above that bar’s high, so I would also call that a High 1.
22:34 - 22:36
EN: This high is below that high.
22:36 - 22:38
EN: That’s a High 1.
22:38 - 22:39
EN: And this is a second reversal up.
22:39 - 22:41
EN: If you want, you can call that a High 2.
22:42 - 22:44
EN: Here we have pretty strong rally,
22:44 - 22:48
EN: and this high is below the high of that bar, so that’s a High 1 buy.
22:48 - 22:51
EN: It triggered, but it immediately reversed down.
22:51 - 22:54
EN: I think if you take that buy, your stop is down here,
22:54 - 22:57
EN: the bottom of the most recent leg up, and you hold
22:57 - 23:02
EN: because we could get more of a pullback, yet the trade still could be profitable.
23:03 - 23:06
EN: Here, we have another pullback from a new high.
23:06 - 23:11
EN: 6 bars in a bear Micro Channel, so not all that high probability.
23:11 - 23:14
EN: Higher probability is wait for a second buy above that.
23:14 - 23:16
EN: You could call this a High 2, a sideways High 2,
23:16 - 23:20
EN: or you could wait for 2 or 3 bull bars closing near their highs
23:20 - 23:22
EN: and start to buy above those bars.
23:22 - 23:27
EN: The risk is greater; however, the probability is higher.
23:30 - 23:31
EN: Again, I said this is a High 1.
23:31 - 23:33
EN: We did not make a new high.
23:33 - 23:35
EN: We’re trying to reverse up a second time.
23:35 - 23:36
EN: You can call that a High 2.
23:42 - 23:45
EN: I want to make an important point about High 2s.
23:45 - 23:49
EN: A High 2 means the bears twice tried to reverse the market down,
23:49 - 23:55
EN: and if they fail twice, most bears will exit if the bull trend resumes up,
23:55 - 23:59
EN: and that’s why High 2 bull flags are especially good,
23:59 - 24:01
EN: especially if they’re at the Moving Average.
24:01 - 24:04
EN: The bears tried to get a reversal down, they failed,
24:04 - 24:08
EN: but a lot of bears might hold short if they sold below that or that.
24:08 - 24:13
EN: However, if it reverses up a second time, most bears would give up.
24:13 - 24:17
EN: Therefore a High 2 is a higher probability buy than a High 1.
24:20 - 24:22
EN: Another example of a High 2.
24:22 - 24:24
EN: The bears tried to get a reversal down.
24:24 - 24:26
EN: They tried to reverse down a second time.
24:26 - 24:28
EN: It’s failing a second time.
24:28 - 24:30
EN: Higher probability that we’ll go up.
24:32 - 24:35
EN: If you take that buy, would you put your stop here?
24:35 - 24:38
EN: Well, you might put your stop here initially,
24:38 - 24:42
EN: but maybe by the close of this bar, you’d put your stop here.
24:46 - 24:48
EN: Every Double Bottom – here we have a small Double Bottom,
24:48 - 24:52
EN: this low and these lows – every Double Bottom is a High 2.
24:55 - 24:57
EN: Here, you can also call it a Triangle.
24:58 - 24:59
EN: You have three bottoms.
24:59 - 25:04
EN: Then we have a Lower High and we have a Higher Low here.
25:04 - 25:09
EN: I know it’s not a perfect Triangle, but it’s sideways and it’s getting tighter,
25:09 - 25:10
EN: so I would call that a Triangle.
25:10 - 25:13
EN: So you can either call this a High 1 and a High 2,
25:13 - 25:16
EN: or you can say, well, it’s a Triangle, so maybe it’s a High 3.
25:16 - 25:18
EN: High 1, High 2, High 3.
25:19 - 25:24
EN: Sometimes you’ll get one more new high, but it’s still part of a correction.
25:27 - 25:29
EN: If you’re taking a Triangle buy,
25:29 - 25:31
EN: I’d put the stop below the bottom of the Triangle.
Slide 012
Time: 25:33
Bilingual Transcript
25:37 - 25:40
EN: We have a gap up and a strong rally.
25:40 - 25:41
EN: We sold off.
25:41 - 25:44
EN: This is a High 1, but 4 bear bars.
25:44 - 25:45
EN: Not a good buy.
25:45 - 25:48
EN: We have a second leg down to a new low.
25:48 - 25:52
EN: It’s a Higher Low, and it’s a Double Bottom with the low of the day.
25:52 - 25:53
EN: It’s a High 2.
25:54 - 25:58
EN: I don’t want to be buying above the bear bar, but this is a reasonable buy.
25:58 - 26:01
EN: Two legs down, testing the Moving Average,
26:01 - 26:03
EN: testing the low of the day, forming a Double Bottom.
26:03 - 26:05
EN: Here, a Higher Low Double Bottom.
26:05 - 26:08
EN: So for me, this would be a High 2 bull flag.
26:11 - 26:16
EN: We have one leg down and then a Trading Range and then a second leg down.
26:16 - 26:19
EN: So this would be a large High 2 bull flag.
26:22 - 26:26
EN: I mentioned that I also want to talk about Wedge Tops and Wedge Bottoms.
26:26 - 26:28
EN: Let me talk about Wedge Bottoms first.
Slide 013
Time: 26:28
Bilingual Transcript
26:31 - 26:34
EN: I have a very loose definition of a Wedge.
26:34 - 26:37
EN: For me, it’s three bottoms in a bear channel,
26:37 - 26:42
EN: so a channel that’s sloped down and has at least three reversals.
26:42 - 26:44
EN: Sometimes it has four or five.
26:46 - 26:47
EN: We’re in a bear channel.
26:47 - 26:51
EN: This high is above that high, but it’s still basically a bear channel,
26:51 - 26:53
EN: and then three reversals up.
26:53 - 26:55
EN: Therefore, it’s a Wedge.
26:55 - 27:01
EN: You can see how I drew it using Point 1 and Point 3, and Point 2 is below.
27:01 - 27:04
EN: I’m always drawing channels so that there’s an overshoot.
27:05 - 27:09
EN: Sometimes I’ll use Point 1 and Point 2 for the line,
27:09 - 27:12
EN: but I’ll only do that if Point 3 would then be below the line.
27:12 - 27:14
EN: It doesn’t matter how you draw it,
27:14 - 27:19
EN: but I personally like my lines to have at least one overshoot.
27:19 - 27:24
EN: So in this case, to get the overshoot, I had to connect Points 1 and 3.
27:25 - 27:30
EN: Sometimes if you connect Point 1 and Point 2, the third leg goes below.
27:30 - 27:35
EN: I’ll pick the point for the line in a way so that there’ll be an overshoot.
27:35 - 27:39
EN: Either the second point overshoots or the third point overshoots.
27:39 - 27:42
EN: But bear channel, three legs.
27:42 - 27:46
EN: Usually some kind of convergence of the lines.
27:49 - 27:51
EN: If you have a decent bull signal bar,
27:51 - 27:55
EN: especially if there’s a Micro Double Bottom or a second reversal up,
27:55 - 27:57
EN: that is a reasonable buy.
27:57 - 28:02
EN: You’re expecting at least two legs sideways to up, so one, pullback, two.
28:02 - 28:05
EN: Therefore, I would not get out of longs below these bars
28:05 - 28:08
EN: because I’m expecting a Higher Low and a second leg up.
28:09 - 28:13
EN: Here we have an extremely strong rally, but look to the left.
28:13 - 28:15
EN: We’re at the top of a Trading Range.
28:15 - 28:18
EN: We’re a little above the top, but this still could be a bull leg
28:18 - 28:21
EN: in a Trading Range, and it could be a Buy Climax.
28:21 - 28:24
EN: When you get the biggest bull bars late in a bull trend,
28:24 - 28:27
EN: especially if you’re still possibly in a Trading Range,
28:27 - 28:29
EN: it will attract profit-taking.
28:37 - 28:41
EN: Now, if you’re a bear and you bought back your shorts here,
28:41 - 28:44
EN: you’re expecting at least a couple legs up,
28:44 - 28:47
EN: and you’ll look to sell probably near the top of the Wedge.
28:49 - 28:51
EN: Now, why would bears not sell right away?
28:52 - 28:56
EN: If a bear got out after a 30 bar trend,
28:57 - 28:59
EN: he’s not looking to buy back on the very next bar.
28:59 - 29:03
EN: He’ll want to wait for a couple legs sideways to up.
29:03 - 29:07
EN: He wants to know if the bulls are strong enough to reverse the trend
29:07 - 29:08
EN: from a bear trend into a bull trend.
29:08 - 29:12
EN: He usually wants to give the bulls at least a couple chances to try,
29:12 - 29:14
EN: and that means the bears, before they sell again,
29:14 - 29:17
EN: will want to see at least a couple legs sideways to up.
29:18 - 29:20
EN: So one, pullback, two.
29:20 - 29:22
EN: While this could be the end of the correction,
29:22 - 29:27
EN: as a general rule I’m looking for two legs – one, pullback, two
29:27 - 29:32
EN: – and I’m looking for the rally to have about half as many bars as the Wedge.
29:32 - 29:36
EN: This does not have half as many bars as this,
29:36 - 29:41
EN: so I would expect at least more sideways to up bars.
29:42 - 29:45
EN: Once the bears decide that it looks like the bulls might be failing,
29:45 - 29:47
EN: they’ll sell again.
29:47 - 29:49
EN: We broke out above the top of the Wedge.
29:50 - 29:53
EN: First reversal down, some bears will sell.
29:53 - 29:57
EN: But once you get a second reversal down, you’ll start getting more bears selling
29:57 - 29:59
EN: and more bulls selling out of their longs.
Slide 014
Time: 30:00
Bilingual Transcript
30:06 - 30:07
EN: A Wedge Bottom.
30:07 - 30:10
EN: Two legs up – one, pullback, two.
30:10 - 30:16
EN: Very often after a Wedge Bottom, the pullback will also form the right shoulder
30:16 - 30:20
EN: of a Head and Shoulders Bottom – so left shoulder, head, right shoulder
30:20 - 30:23
EN: – and the left shoulder is the second leg down in the Wedge.
30:23 - 30:25
EN: So one, two, three.
30:26 - 30:30
EN: This is also often a Higher Low Major Trend Reversal.
30:35 - 30:37
EN: A big bear bar closing on or near its low.
30:37 - 30:41
EN: A failed breakout above the top of what could be a Trading Range.
30:41 - 30:47
EN: It’s reasonable to exit longs below that bear bar, and bears will start to sell.
Slide 015
Time: 30:50
Bilingual Transcript
30:52 - 30:54
EN: Well, you look at a chart like this and you say,
30:54 - 30:56
EN: “Well, you know, where do I draw the lines?
30:56 - 30:58
EN: I’ve got three pushes down.
30:58 - 30:59
EN: Al says that’s a Wedge.
30:59 - 31:03
EN: Well, maybe it’s three pushes down using that low, or this low,
31:03 - 31:06
EN: or that low, or this low.” It’s confusing.
31:06 - 31:07
EN: There are all kinds of ways to do it.
31:07 - 31:10
EN: Some computers will use these lows; other computers
31:10 - 31:12
EN: will use these lows for the first point.
31:12 - 31:17
EN: The more ways there are to draw the Wedge, the more likely you’re going
31:17 - 31:22
EN: to get a reversal because you’ll have more and more computers spotting the Wedge.
31:22 - 31:24
EN: Some might not call this a Wedge,
31:24 - 31:27
EN: but they might call that a Wedge channel, or this, or this.
31:27 - 31:29
EN: And the more ways to draw a Wedge,
31:29 - 31:32
EN: the more likely you’ll get two legs sideways to up.
31:35 - 31:38
EN: One way is Point 1, Point 2, Point 3.
31:38 - 31:43
EN: Remember what I said earlier that I choose the lines to draw the Wedge
31:43 - 31:47
EN: in a way so that either Point 2 or Point 3 will overshoot.
31:47 - 31:51
EN: The example I gave earlier, Point 2 was the overshoot.
31:51 - 31:57
EN: Here, I only get an overshoot if I use Point 1 and Point 2 to draw the line,
31:57 - 31:59
EN: and then Point 3 is the overshoot.
32:04 - 32:06
EN: But there are lots of ways to draw this Wedge.
32:06 - 32:07
EN: One, two, three.
32:07 - 32:08
EN: One, two, three.
32:08 - 32:09
EN: One, two, three.
32:09 - 32:11
EN: Any of these for Point 1.
32:11 - 32:14
EN: When there are a lot of ways to draw a Wedge,
32:14 - 32:16
EN: a lot of the computers will be thinking reversal.
32:16 - 32:19
EN: It increases the chances that we will get a reversal.
32:20 - 32:22
EN: Not so good to buy above a bear bar.
32:22 - 32:24
EN: Maybe buy above a bull bar here.
32:25 - 32:29
EN: But after that bear bar in a pretty Tight Bear Channel with 4 bear bars,
32:29 - 32:31
EN: it’s probably better to wait for a second buy,
32:31 - 32:33
EN: which would be above that or above that,
32:33 - 32:36
EN: looking for at least a couple legs up – maybe one, pullback, two.
32:36 - 32:38
EN: Well, that’s not enough bars.
32:38 - 32:42
EN: Remember, I want to see about half as many bars as there are in the Wedge.
32:42 - 32:47
EN: So what about one, pullback, two or one, pullback, two?
32:47 - 32:48
EN: Well, maybe.
32:48 - 32:52
EN: But even this is not half as many bars as there are in the bigger Wedge.
32:52 - 32:56
EN: So this might be a complex one, pullback, two.
33:01 - 33:04
EN: Different ways to draw the Wedge, but the bottom is the same for all of them.
33:04 - 33:08
EN: That increases the chances that we’ll get a reversal.
33:11 - 33:16
EN: Again, whenever you have a Wedge, very often the Higher Low forms
33:16 - 33:18
EN: the right shoulder of a Head and Shoulders Bottom,
33:18 - 33:20
EN: and Point 2 is the left shoulder.
33:21 - 33:24
EN: So it’s also a Higher Low Major Trend Reversal.
33:27 - 33:30
EN: I want to make a point about this channel here.
33:30 - 33:32
EN: We’re channeling up.
33:32 - 33:35
EN: I’m going to start looking for a Wedge rally.
33:36 - 33:41
EN: Very often, the first leg up in the bull channel
33:41 - 33:44
EN: begins before the bear trend ends.
33:44 - 33:49
EN: That’s because markets often go through a transition phase
33:49 - 33:52
EN: where the bull trend begins before the bear trend ends,
33:52 - 33:55
EN: and if you’re in a bull trend converting into a bear trend,
33:55 - 33:58
EN: very often you start to get some evidence that the bear trend
33:58 - 34:01
EN: is beginning before the bull trend ends.
Slide 016
Time: 34:02
Bilingual Transcript
34:04 - 34:07
EN: Now, again, where’s the Wedge?
34:10 - 34:12
EN: Well, we had an attempt at a Wedge here.
34:12 - 34:17
EN: Different ways to draw it – one, two, and three – and it’s also something
34:17 - 34:19
EN: of a little Double Bottom, and you have a bull bar,
34:19 - 34:22
EN: and it’s the second buy signal with a bull bar.
34:22 - 34:24
EN: So it’s credible to buy there.
34:24 - 34:29
EN: Not great because of that tail, and the bars are not very big compared
34:29 - 34:32
EN: to the bear bars, but it’s a reasonable buy.
34:32 - 34:36
EN: If you have a Wedge Bottom and you get stopped out,
34:36 - 34:42
EN: in general you should assume 50% chance the breakout below the Wedge will fail
34:42 - 34:46
EN: and we’ll get a reversal up, and 50% chance the breakout
34:46 - 34:50
EN: below the Wedge will be successful and we’ll get a swing down.
34:50 - 34:54
EN: So some bulls who take that buy, instead of putting a stop here,
34:54 - 34:58
EN: will use a very wide stop, taking the chance, the 50% chance,
34:58 - 35:00
EN: that the breakout below the Wedge will fail,
35:00 - 35:03
EN: and then they’ll buy more above this or that.
35:03 - 35:06
EN: Other bulls will get stopped out below the bottom of the Wedge,
35:06 - 35:10
EN: one tick below that, and take the second attempt to reverse up,
35:10 - 35:12
EN: either above that or above that.
35:19 - 35:22
EN: Sometimes a Wedge can grow into a bigger Wedge.
35:22 - 35:25
EN: Then this becomes a Wedge buy signal as well.
35:25 - 35:29
EN: It also is a buy signal for a failed breakout below that Wedge.
35:31 - 35:33
EN: Now we’re starting to get very strong bull bars,
35:33 - 35:37
EN: big bull bars closing on their highs, and these bars are starting
35:37 - 35:40
EN: to become comparable in strength to the bear bars.
35:40 - 35:43
EN: Big bear bar, but tail below, tail above.
35:43 - 35:45
EN: Big bear bar, tail below, tail below,
35:45 - 35:48
EN: and we’re getting stronger looking bull bars.
35:48 - 35:51
EN: This has a higher probability of a swing up.
35:56 - 35:59
EN: We have a second buy above that bar.
35:59 - 36:01
EN: Increased probability of a swing up.
36:01 - 36:03
EN: A second good buy setup.
36:08 - 36:11
EN: Now, here’s the low, the start of the bull trend,
36:11 - 36:14
EN: but as it’s going up I’m looking for a bull channel.
36:15 - 36:18
EN: I look to the left, and maybe the bull channel began here,
36:18 - 36:20
EN: before the bear trend ended.
36:21 - 36:22
EN: That’s very common.
36:22 - 36:26
EN: You can see if I just use these lines and I extend them to the left,
36:26 - 36:29
EN: they connect to this high, and that tells you
36:29 - 36:31
EN: that this may have been the start of the bull channel.
36:31 - 36:36
EN: Markets transition from bear trend to bull trend, and there’s often a period
36:36 - 36:41
EN: of time when both the bull forces and the bear forces are operating.
36:41 - 36:45
EN: So the bull channel sometimes begins before the bear trend ends.
Slide 017
Time: 36:48
Bilingual Transcript
36:49 - 36:51
EN: All right, do you see any Wedges here?
36:54 - 36:57
EN: Well, what do you notice about this bar?
36:57 - 36:58
EN: It’s big.
36:58 - 36:59
EN: It has a big body.
36:59 - 37:00
EN: In fact, look to the left.
37:00 - 37:05
EN: We have a bear trend, and this is the biggest bear bar coming late
37:05 - 37:08
EN: in the bear trend, 20 more bars into the bear trend.
37:08 - 37:14
EN: When that’s the case, 60% chance either we’re at the end of the bear trend
37:14 - 37:20
EN: – which means we go sideways or we go up – or we get one more brief leg down,
37:20 - 37:22
EN: a pullback and one more brief leg down,
37:22 - 37:24
EN: and that will be the end of the bear trend.
37:25 - 37:30
EN: So if you see a big bear breakout late in a bear trend,
37:30 - 37:34
EN: 60% chance the bear trend is ending or ending soon.
37:36 - 37:41
EN: We have a Tight Bear Channel with three legs down – one and then two and three
37:41 - 37:44
EN: – so I would call that a Parabolic Wedge Bottom,
37:44 - 37:47
EN: and it’s within a bigger Wedge Bottom.
37:47 - 37:50
EN: So the third leg down in the Wedge is a Parabolic Wedge,
37:50 - 37:54
EN: so you have a smaller Wedge inside of a bigger Wedge.
37:54 - 37:56
EN: That is a nested Wedge.
37:56 - 38:00
EN: That is a higher probability for a reversal up.
38:04 - 38:06
EN: A reversal bar, close above the midpoint,
38:06 - 38:09
EN: closing near the high, but it has a bear body.
38:09 - 38:13
EN: Some traders prefer to buy above bull bars closing on or near their highs.
38:13 - 38:15
EN: So some traders will take the buy above that;
38:15 - 38:18
EN: others will wait for bull bars closing on or near their highs.
38:18 - 38:20
EN: Higher probability.
38:23 - 38:25
EN: Again, possible Wedge Bottom.
Slide 018
Time: 38:25
Bilingual Transcript
38:25 - 38:26
EN: Can you see?
38:26 - 38:28
EN: One, two, three.
38:31 - 38:34
EN: A Wedge Bottom, but a bad buy signal bar.
38:34 - 38:38
EN: A bear doji, plus it’s following a big bear bar, so not a great buy.
38:38 - 38:42
EN: You can buy above a bull bar, but both of these bull bars have tails on top
38:42 - 38:44
EN: and the bodies are not very big.
38:44 - 38:49
EN: So a lot of traders will wait for a second buy signal, like that or above this,
38:49 - 38:54
EN: or now we’re getting a bull bar closing near its high, so that or above that.
39:01 - 39:03
EN: Higher probability that we’re going up if you start
39:03 - 39:05
EN: to get bull bars closing near their highs.
39:05 - 39:07
EN: Traders will start to buy above those bull bars.
39:08 - 39:14
EN: If you took these buys, you could put your stop below here or below there,
39:14 - 39:18
EN: but at this point I would have my stop either below that or below this,
39:18 - 39:21
EN: the bottom of what appears to be a reversal up.
39:22 - 39:23
EN: A lot of bull bars here.
39:23 - 39:25
EN: We’re starting to get a lot of bull bars.
39:25 - 39:28
EN: Here we have a lot of bear bars, but now we’re starting to get more bull bars,
39:28 - 39:31
EN: and a lot of bull bars closing on or near their highs.
39:32 - 39:36
EN: That’s a sign of aggressive buying – Buying Pressure – and it increases
39:36 - 39:38
EN: the chances that we’re going higher.
Slide 019
Time: 39:40
Bilingual Transcript
39:42 - 39:46
EN: Again, different ways to draw a Wedge Bottom – one, two, three.
39:50 - 39:54
EN: Here, a Tight Bull Channel with three legs up – one, pullback,
39:54 - 39:57
EN: and then a second breakout, pullback, and a third.
39:58 - 40:03
EN: So when you have a very Tight Bull Channel with three tops in it,
40:03 - 40:07
EN: it’s a Parabolic Wedge and you often get some kind of a pullback.
40:07 - 40:09
EN: Sometimes you’ll get a reversal into a bear trend.
40:14 - 40:18
EN: Now, as big as the selloff was, look at the low.
40:18 - 40:20
EN: It held above this.
40:20 - 40:23
EN: So this is a pullback from this.
40:23 - 40:27
EN: Even though it has more bars going down than we had going up, it’s a Higher Low.
40:28 - 40:30
EN: If you want, you can call it a Wedge Bottom,
40:30 - 40:32
EN: or you could simply call it a Wedge bull flag.
40:38 - 40:41
EN: I want to buy above a bull bar closing on or near its high.
40:42 - 40:45
EN: This low broke below that, so it’s a failed breakout below a Wedge.
40:45 - 40:49
EN: You can also call it a Wedge with a Lower Low Double Bottom.
40:50 - 40:51
EN: The buy did not trigger.
40:51 - 40:54
EN: We did not go above these bull bars, but we did go above that,
40:54 - 40:56
EN: and now we have a second bull bar.
40:56 - 40:57
EN: That’s higher probability.
40:58 - 41:01
EN: And now we’re not getting bear bars, so traders will start buying
41:01 - 41:05
EN: above the highs of bars, especially bull bars, for a swing up.
Slide 020
Time: 41:06
Bilingual Transcript
41:08 - 41:11
EN: Wedge – one, two, three.
41:11 - 41:12
EN: But?
41:17 - 41:18
EN: You see a “but” in there?
41:19 - 41:22
EN: So we’ve got three legs down, but it’s a pretty strong bear channel.
41:22 - 41:26
EN: Look how strong this selloff is, this series of bear bars.
41:26 - 41:28
EN: Remember, if the market’s in a strong bear trend,
41:28 - 41:31
EN: it’s always going to be forming Wedge Bottoms,
41:31 - 41:33
EN: and you should not be looking for reversals up.
41:40 - 41:41
EN: And if you’re looking for a Wedge,
41:41 - 41:45
EN: I would start the count over again once you have a strong leg like this.
41:45 - 41:47
EN: So I would not call this one, two.
41:47 - 41:49
EN: I would say, okay, I’m going to start it over again.
41:49 - 41:51
EN: This becomes one.
41:51 - 41:53
EN: Oh, we got another strong selloff?
41:53 - 41:57
EN: Then this becomes a new first leg down, and maybe second and third.
42:02 - 42:05
EN: Or maybe one, two, three different ways to draw it.
42:05 - 42:07
EN: Here we got a second reversal up.
42:07 - 42:08
EN: This is higher probability.
42:11 - 42:12
EN: Weak buy signal bar.
42:12 - 42:17
EN: Tail, small body, after 3 bear bars, a Tight Bear Channel.
42:17 - 42:20
EN: Better to wait for a second buy above that or above that.
42:24 - 42:28
EN: If you take the buy, your stop is down here,
42:28 - 42:30
EN: and therefore you would not get stopped out.
42:30 - 42:35
EN: This is a Higher Low as well, so still okay to be long.
Slide 021
Time: 42:37
Bilingual Transcript
42:41 - 42:46
EN: Here, this is the start of a day on a 5-minute chart, and we have that low,
42:46 - 42:51
EN: two, and three, and then from yesterday we had this low, two, and three.
42:51 - 42:53
EN: A couple ways to draw a Wedge.
42:53 - 42:56
EN: Different computers see it differently.
42:56 - 43:01
EN: Pretty good bull bar here, but 3 bear bars in a Tight Bear Channel.
43:01 - 43:02
EN: Not a very good buy.
43:02 - 43:06
EN: Here, it’s a second buy, but a bear bar.
43:06 - 43:07
EN: Not that good.
43:07 - 43:11
EN: Here you’ve got a pullback from this rally, but a very big bear bar.
43:11 - 43:12
EN: Not all that good.
43:12 - 43:16
EN: And here, now we have two different ways to draw a Wedge.
43:16 - 43:21
EN: It’s a third or fourth bull bar – one, two, three, four,
43:21 - 43:23
EN: closing on or near its high.
43:23 - 43:25
EN: We’re starting to get Buying Pressure.
43:25 - 43:27
EN: This would be a higher probability buy.
43:27 - 43:28
EN: Wedge Bottom.
43:39 - 43:41
EN: Where’s the Wedge here?
Slide 022
Time: 43:40
Bilingual Transcript
43:41 - 43:42
EN: Different ways to draw it.
43:45 - 43:48
EN: At this point we’re in a Trading Range.
43:48 - 43:51
EN: Yes, we have a Lower Low, but we have a Higher High as well.
43:51 - 43:52
EN: It’s a Trading Range.
43:52 - 43:53
EN: It’s not clear.
43:53 - 43:57
EN: In Trading Ranges, patterns often look bad.
43:57 - 43:59
EN: That’s just the nature of Trading Ranges.
43:59 - 44:03
EN: You have to assume things don’t look like they should look
44:03 - 44:04
EN: or the way you want them to look.
44:04 - 44:06
EN: But they can still be tradeable.
44:09 - 44:13
EN: We’re in a Trading Range here, and then look at this.
44:14 - 44:17
EN: A small brief pullback, and then pause, pause.
44:17 - 44:18
EN: This is a Small Pullback Bull Trend.
44:18 - 44:22
EN: So it was a Trading Range day for the first half,
44:22 - 44:25
EN: and then a Small Pullback Bull Trend, a strong trend, for the second half.
44:29 - 44:34
EN: We have a low, a pullback, a Sell Climax, a pullback, and a third leg down.
44:34 - 44:36
EN: So that’s one way to draw the Wedge.
44:36 - 44:39
EN: And then we have a strong reversal up, another strong reversal up.
44:39 - 44:43
EN: We’re breaking below it, and this is a third way to draw it.
44:43 - 44:44
EN: Now, look at this.
44:44 - 44:46
EN: Point 1, Point 2, Point 3.
44:47 - 44:49
EN: I’m looking for overshoots.
44:49 - 44:53
EN: So to draw that line, I would use Point 1 and Point 3,
44:53 - 44:54
EN: and Point 2 is an overshoot.
44:54 - 44:58
EN: If I’m looking at this as a possible Wedge, I want an overshoot,
44:58 - 45:03
EN: so I would use Point 1 and Point 2, and Point 3 is the overshoot.
45:03 - 45:06
EN: Doesn’t matter how you do it, but when I draw my lines,
45:06 - 45:11
EN: I always prefer to draw them in a way so that there will be an overshoot.
45:16 - 45:19
EN: A Triangle, fairly late in a bear trend.
45:19 - 45:22
EN: Often a final bear flag.
45:22 - 45:23
EN: And then look at this.
45:23 - 45:26
EN: The 2 biggest bear bars of the entire 30 bar trend.
45:27 - 45:32
EN: As I said earlier, 60% chance it’s either going to be the end of the selling
45:32 - 45:35
EN: or we’ll get a brief leg down, and that will be the end.
45:36 - 45:39
EN: And then finally, if you have a Sell Climax like that
45:39 - 45:44
EN: and you have a pair of inside bars – this bar is inside that, this is inside that,
45:44 - 45:50
EN: this is an ii buy signal – that is a pretty reliable buy setup.
45:50 - 45:52
EN: It could be a bear flag.
45:52 - 45:56
EN: If it is a bear flag, it’s often a final bear flag.
45:56 - 45:58
EN: But it’s also a buy signal.
45:58 - 46:02
EN: You could buy above the bear bar, above that bull bar, or above this bull bar,
46:02 - 46:04
EN: or wait for the Small Pullback Bull Trend to begin.
46:05 - 46:09
EN: But you have a Sell Climax, two ways to draw a Wedge,
46:09 - 46:11
EN: a possible Final Flag, and you have an ii.
46:11 - 46:14
EN: This is a reasonable place to look to buy.
Slide 023
Time: 46:17
Bilingual Transcript
46:18 - 46:20
EN: All right, so where’s the Wedge here?
46:20 - 46:23
EN: Well, you’ve got one here, you’ve got one here.
46:23 - 46:24
EN: But remember what I said earlier.
46:25 - 46:28
EN: If the market is in a strong bear trend,
46:28 - 46:30
EN: it’s always going to be forming Wedge Bottoms.
46:30 - 46:34
EN: When it’s in a strong bear trend, you should not be looking to buy.
46:34 - 46:35
EN: You should only be looking to sell.
46:40 - 46:43
EN: Lots of bull bars, so lots of potential ways to draw a Wedge
46:43 - 46:48
EN: – one, two, and then three or one, two, and three.
46:48 - 46:50
EN: Lots of ways to draw them.
46:50 - 46:53
EN: But brief pullback, brief pullback, small pullback.
46:53 - 46:55
EN: Lots of bear bars, staying below the Moving Average.
46:55 - 46:58
EN: You only want to be selling.
47:02 - 47:05
EN: Another way to draw a Wedge, possible low of the day.
47:05 - 47:07
EN: But a Tight Bear Channel.
47:07 - 47:09
EN: Probably a minor reversal.
47:10 - 47:13
EN: Two legs up – one, pullback, two – to the Moving Average.
47:13 - 47:17
EN: I would rather look to sell on a reversal down from the Moving Average.
47:22 - 47:25
EN: Also a Double Top bear flag, a pretty common pattern.
47:25 - 47:28
EN: The market’s trying to reverse up twice and it fails.
47:28 - 47:32
EN: Look to sell below a bear bar, especially if it’s at the Moving Average.
47:33 - 47:38
EN: Here we have a bear breakout below a Wedge Bottom and follow-through.
47:38 - 47:43
EN: You’d prefer a bear bar, but one thing you do not want is a good bull bar.
47:43 - 47:46
EN: So we have a bear breakout and okay follow-through,
47:46 - 47:51
EN: so traders will sell below bars, below a bear bar here or below a bear bar here,
47:51 - 47:54
EN: taking a chance that instead of an exhaustion bar,
47:55 - 47:57
EN: we’re getting a Measured Move down.
47:57 - 47:59
EN: Remember I said that if you break below a Wedge,
47:59 - 48:03
EN: 50/50 chance the breakout will fail, 50/50 chance it’ll reverse
48:03 - 48:07
EN: – except if it’s a Small Pullback Bear Trend and you get a breakout.
48:07 - 48:10
EN: Then it’s more like 60% or 70% that you’re going lower.
48:14 - 48:15
EN: A Wedge reversal.
48:15 - 48:17
EN: So I want to talk about Wedge Tops.
48:18 - 48:21
EN: I talked about Wedge Bottoms; Wedge Tops now.
Slide 024
Time: 48:19
Bilingual Transcript
48:25 - 48:26
EN: Different ways to draw it.
48:26 - 48:28
EN: I’ve got three points.
48:28 - 48:31
EN: I can use one, two, and draw the line up here,
48:31 - 48:32
EN: but it makes it hard to see the Wedge.
48:32 - 48:37
EN: So I choose to use Point 3 so that we have an overshoot here.
48:37 - 48:39
EN: Remember, I pick the Point 2 or Point 3
48:39 - 48:43
EN: for the line in a way that one will get an overshoot.
48:43 - 48:45
EN: I’m always looking for an overshoot.
48:45 - 48:48
EN: So for me, this would be one, two, three legs and a rally,
48:48 - 48:53
EN: and to draw the line I’ll pick 1 and 3, and then 2 is an overshoot.
48:56 - 48:59
EN: Very strong rally, so could start the count over again.
48:59 - 49:04
EN: So it could be one, pullback, two, pullback, three or one, two, three.
49:04 - 49:06
EN: Or you can call it a nested Wedge.
49:15 - 49:20
EN: If you’re a bull and you exit either below that bear bar or this bear bar,
49:20 - 49:24
EN: you’re expecting at least a couple legs down – one, pullback, two, here three
49:25 - 49:27
EN: – and you’re expecting the reversal down
49:27 - 49:29
EN: to have about half as many bars as the rally.
49:29 - 49:32
EN: Sometimes it can have a lot more.
49:33 - 49:37
EN: The bulls, they exit, and the reason they wait for a couple legs is they want
49:37 - 49:40
EN: to give the bears a chance to create a reversal.
49:40 - 49:44
EN: If the bears try twice to get a reversal down
49:44 - 49:47
EN: and they cannot reverse the market down,
49:47 - 49:49
EN: then the bulls will start to look to buy again.
49:50 - 49:52
EN: That means they’ll start to look for a High 2 bull flag.
49:52 - 49:56
EN: Here, the bears have 5 bear bars in a Tight Channel.
49:56 - 49:59
EN: We’re probably going lower, so I would not be looking to buy.
Slide 025
Time: 50:03
Bilingual Transcript
50:07 - 50:10
EN: Stock traders prefer looking to buy, so they’re not looking to short.
50:10 - 50:11
EN: Most.
50:11 - 50:15
EN: Some short, but most are looking to buy.
50:15 - 50:18
EN: However, Wedges are still important if you’re a stock trader
50:18 - 50:23
EN: because if this is a weekly chart, for example, and you’re long for any reason,
50:23 - 50:28
EN: it’s a good opportunity to exit because we may get a deep pullback or a reversal.
50:32 - 50:36
EN: We have a very Tight Bull Channel, so reasonable to stay long.
50:36 - 50:40
EN: But if we get a second reversal down with bear bars
50:40 - 50:43
EN: closing on their lows like this, it’s reasonable to get out.
50:43 - 50:48
EN: Bears will short, and some traders will short by buying puts or put spreads.
50:52 - 50:53
EN: A second sell signal.
50:53 - 50:55
EN: So here’s the first.
50:55 - 50:58
EN: This went below these bars, and this is the second,
50:58 - 51:00
EN: when this went below these bars.
51:05 - 51:08
EN: We have a Lower High, a Double Top Lower High.
51:08 - 51:11
EN: Whenever you have a Wedge and then a Lower High,
51:11 - 51:14
EN: it’s also a Head and Shoulders Top,
51:14 - 51:18
EN: where the left shoulder is the second leg up in the Wedge.
51:18 - 51:21
EN: And it’s also usually a Lower High Major Trend Reversal
51:21 - 51:25
EN: and you’re expecting a second leg down either here or here.
Slide 026
Time: 51:28
Bilingual Transcript
51:32 - 51:33
EN: Wedge.
51:33 - 51:36
EN: We have three legs up – one, pullback, two, pullback, three.
51:36 - 51:39
EN: We have a first reversal down here.
51:39 - 51:43
EN: I could’ve drawn the Wedge one, two, and three.
51:43 - 51:46
EN: This is not a Higher High, so it’s not really a Wedge.
51:46 - 51:48
EN: You can call it a Truncated Wedge
51:48 - 51:50
EN: where the third high did not go above the second.
51:51 - 51:55
EN: But with these 2 bull bars, I wait for a second sell, and we have it here.
51:56 - 52:00
EN: Traders will start to sell below bear bars closing on or near their lows,
52:00 - 52:02
EN: looking for at least a couple legs down.
52:06 - 52:08
EN: Very strong leg down.
52:08 - 52:11
EN: Very strong leg down here.
52:11 - 52:14
EN: So these two legs represent very strong selling.
52:14 - 52:16
EN: Selling Pressure.
52:16 - 52:20
EN: It increases the chances that we’ll eventually get a reversal down.
52:23 - 52:29
EN: The first pullback is often the right shoulder of a Head and Shoulders Top.
52:31 - 52:34
EN: At the bottom, different ways to look at this.
52:34 - 52:39
EN: One is one, two, three – possible Wedge – or one, two, and three.
52:39 - 52:43
EN: If this is a 5-minute chart and we’re late in the day,
52:43 - 52:46
EN: it’s certainly reasonable to get out of shorts on this reversal up.
52:47 - 52:51
EN: Even if it’s a daily chart, we’re down near a prior low,
52:51 - 52:53
EN: so you’d expect some buyers here.
52:53 - 52:55
EN: They bought at this price earlier.
52:55 - 53:00
EN: We’re at that price now, so reasonable to get out of shorts down here.
53:04 - 53:07
EN: Here, I’m looking for a channel.
53:07 - 53:09
EN: I’m always looking for channels.
53:09 - 53:11
EN: This is a pretty strong leg down.
53:11 - 53:14
EN: Even though it’s not the end of the bull trend,
53:14 - 53:16
EN: I’m still going to pay attention to it because very often,
53:16 - 53:21
EN: the beginning of the bear channel starts before the bull trend ends.
Slide 027
Time: 53:25
Bilingual Transcript
53:25 - 53:30
EN: I said a Wedge has three or four or five legs up.
53:30 - 53:32
EN: Sometimes it has several legs up.
53:33 - 53:36
EN: Here we got a strong rally, a second leg, and a third leg.
53:36 - 53:40
EN: It’s a credible short, except this is only a small bear doji
53:40 - 53:43
EN: and we have 2 big bull bars here, and this is pretty strong.
53:43 - 53:46
EN: So this may have started the count over again.
53:46 - 53:49
EN: When I see that, a lot of times I will not take that short.
53:49 - 53:52
EN: I’ll wait to see if we go sideways and get a second sell,
53:52 - 53:55
EN: or wait to see if we go higher and get another reversal down.
54:00 - 54:03
EN: You can call this a consecutive attempt at a Wedge Top.
54:03 - 54:05
EN: This would be a higher probability sell.
54:12 - 54:13
EN: Different ways to look at it.
54:14 - 54:15
EN: Strong rally here.
54:15 - 54:17
EN: The count may’ve started over on some computers,
54:17 - 54:19
EN: so it could be one, two, and three.
54:20 - 54:24
EN: Some traders in a situation like this will take this sell,
54:24 - 54:30
EN: use a wide stop just in case this is a new one, two,
54:30 - 54:35
EN: and three – so they’ll sell here, use a wide stop, and some will sell more here.
54:35 - 54:41
EN: Others will sell, get out above this bear bar, and then sell again there.
54:48 - 54:51
EN: In general, if you think there’s too much Buying Pressure
54:51 - 54:55
EN: and the trend is too strong, it’s better not to take the short
54:55 - 54:58
EN: and wait for a higher probability short.
54:58 - 55:00
EN: When in doubt, stay out.
55:04 - 55:06
EN: All right, so we’re in a channel.
Slide 028
Time: 55:05
Bilingual Transcript
55:06 - 55:07
EN: Maybe we have a Wedge.
55:11 - 55:13
EN: We do have a Wedge, and it’s a credible sell.
55:13 - 55:16
EN: We’ve got two small legs down, but we’re starting to reverse up.
55:16 - 55:21
EN: So a lot of the bears who took this short, after two legs down,
55:21 - 55:23
EN: might get out above the second bull bar here,
55:23 - 55:26
EN: but most would get out after a third or fourth bar up,
55:26 - 55:29
EN: betting that the Wedge Top is not a top.
55:30 - 55:32
EN: We’re breaking above the top of a Wedge.
55:32 - 55:37
EN: Remember what I said earlier: 50% chance you’ll get a swing up,
55:37 - 55:40
EN: 50% chance the breakout above the top will fail,
55:40 - 55:44
EN: and therefore if we get a reversal after breaking above the top of the Wedge,
55:44 - 55:47
EN: traders will sell looking for a swing down.
55:55 - 55:59
EN: Very often you’ll end up with a second way to draw the Wedge,
56:00 - 56:02
EN: and you’re looking for at least a couple legs down.
Slide 029
Time: 56:05
Bilingual Transcript
56:08 - 56:09
EN: Tight Bull Channel.
56:09 - 56:14
EN: A Wedge – one, two, three or one, two, three or one, two, three.
56:14 - 56:16
EN: Different ways to draw it.
56:20 - 56:22
EN: But remember what I said earlier.
56:23 - 56:28
EN: If a bull trend is extremely strong, you should not be looking for Wedge Tops.
56:28 - 56:29
EN: You’ll find them.
56:29 - 56:30
EN: There are plenty of them.
56:30 - 56:33
EN: But instead, it’s a Small Pullback Bull Trend.
56:33 - 56:35
EN: You should only be looking to buy.
56:35 - 56:38
EN: Look for bull bars closing on or near their highs.
56:43 - 56:45
EN: Here we have a breakout.
56:45 - 56:47
EN: Is this going to be an exhaustive Buy Climax?
56:47 - 56:49
EN: Are we going to reverse?
56:49 - 56:52
EN: No, because when you’re in a Small Pullback Bull Trend,
56:52 - 56:56
EN: you often get breakouts – here’s another one, here’s another one
56:56 - 56:58
EN: – and the market can go up a long way.
57:04 - 57:08
EN: Wedge – one, two, and then a third new high.
Slide 030
Time: 57:05
Bilingual Transcript
57:08 - 57:09
EN: A decent bear bar.
57:09 - 57:12
EN: Reasonable to sell or wait for a second sell below that bar.
57:14 - 57:17
EN: Very often you’ll get a test of the top of the Wedge.
57:17 - 57:22
EN: Remember I said sometimes you’ll break above the Wedge and reverse down;
57:22 - 57:25
EN: sometimes you’ll get near the top of the Wedge and reverse down.
57:25 - 57:27
EN: Sometimes you’ll get a perfect Double Top like that.
57:28 - 57:32
EN: If you get out above this, a Parabolic Wedge – one, two, three
57:32 - 57:35
EN: – if you get out of the short here,
57:35 - 57:38
EN: here we’ve got two reversals down and a Double Top.
57:38 - 57:41
EN: It’s a credible sell below these bear bars.
57:41 - 57:45
EN: So very often, you get a Wedge and then a perfect Double Top.
57:50 - 57:54
EN: Now we have a very strong bull trend, and different ways to draw Wedges.
Slide 031
Time: 57:50
Bilingual Transcript
57:54 - 57:58
EN: But when a trend looks like that, it’s usually not worth shorting.
58:02 - 58:07
EN: However, a lot of times you’ll get three pushes up
58:07 - 58:11
EN: – one, two, pause, three – late in a bull trend.
58:11 - 58:14
EN: Then you get a reasonable sell signal bar.
58:15 - 58:18
EN: I think you should get out of longs in that case
58:18 - 58:20
EN: because you could get a deep pullback.
58:20 - 58:22
EN: You can always buy again later.
58:22 - 58:23
EN: Some traders will take the short.
58:23 - 58:26
EN: The risk is not big, and they’re hoping for at least a couple legs down,
58:26 - 58:28
EN: maybe to the Moving Average.
58:28 - 58:32
EN: But at a minimum, bulls who are long I think should get out.
58:32 - 58:36
EN: Parabolic Wedge with a bear bar 20, 30 bars into the trend.
58:40 - 58:44
EN: A Tight Bull Channel, so the reversal is probably going to be minor.
58:45 - 58:48
EN: Only maybe a 30% chance of a major reversal.
58:48 - 58:52
EN: Well, this is an example of that 30%.
58:53 - 58:54
EN: We have a pullback.
58:54 - 58:56
EN: The bulls look for a bull flag – bull flag.
58:56 - 58:57
EN: But now we’re starting to get gaps.
58:57 - 59:00
EN: Close below the prior bar.
59:00 - 59:04
EN: Another gap, and it’s starting to look like a Small Pullback Bear Trend.
59:04 - 59:06
EN: We have a breakout and a bear follow-through bar.
59:06 - 59:09
EN: At this point it’s probably Always In Short,
59:09 - 59:13
EN: so instead of looking to buy, traders will look to sell.
59:17 - 59:23
EN: A breakout bar, close below the prior bar’s low, and a follow-through bear bar.
59:23 - 59:25
EN: So lower prices likely.
59:25 - 59:27
EN: It could be a little bit lower or a lot lower.
59:27 - 59:29
EN: Today it’s a lot lower.
59:31 - 59:33
EN: A rally, a second reversal attempt.
59:33 - 59:35
EN: Unable to get above the Moving Average.
59:35 - 59:38
EN: Possible Double Top bear flag.
59:38 - 59:40
EN: We never had a Major Trend Reversal.
59:40 - 59:45
EN: A Parabolic Wedge is not a major reversal; it’s a minor reversal.
59:45 - 59:49
EN: A traditional Wedge can be major, but a Parabolic Wedge is usually minor.
59:49 - 59:52
EN: So if you do not have a major reversal here,
59:53 - 59:56
EN: traders will think about the possibility
59:56 - 59:59
EN: that some Lower High will be the start of a major reversal.
59:59 - 01:00:02
EN: And sometimes it’s far below the original high.
01:00:02 - 01:00:06
EN: Double Top, Moving Average, bear bar closing near its low.
01:00:06 - 01:00:09
EN: Traders will sell below bear bars closing near their lows.
01:00:09 - 01:00:12
EN: After this breakout, they’ll be selling below bear bars as well.
Slide 032
Time: 01:00:25
Bilingual Transcript
01:00:28 - 01:00:32
EN: Sometimes you’ll see a rally – here we’re far below the Moving Average.
01:00:32 - 01:00:37
EN: Traders are wondering if this rally will form a Lower High and the bear trend will resume.
01:00:37 - 01:00:41
EN: Look at all the sideways bars, all the bear bars, all the tails.
01:00:41 - 01:00:43
EN: This does not look like a strong bull trend.
01:00:43 - 01:00:48
EN: So we have a first push up, a second push up, a third push up.
01:00:48 - 01:00:52
EN: Traders are starting to think this third leg up will be a Wedge Top
01:00:52 - 01:00:56
EN: and that we’ll get a reversal down, and if everybody starts to think
01:00:56 - 01:00:59
EN: that there’s going to be a Wedge bear flag or a Wedge Top,
01:00:59 - 01:01:02
EN: traders will start to sell on the way up
01:01:02 - 01:01:05
EN: just in case we do not get above the prior high, the second leg up.
01:01:06 - 01:01:09
EN: When that happens, you get a third leg up, where the third
01:01:09 - 01:01:13
EN: does not go above the second – yet everybody was looking for a Wedge.
01:01:14 - 01:01:17
EN: So we have a Lower High, everybody’s looking for a Wedge,
01:01:17 - 01:01:20
EN: we have a reversal down after three pushes up.
01:01:20 - 01:01:21
EN: I call that a Truncated Wedge.
01:01:21 - 01:01:24
EN: If you want, you can simply call it a Double Top,
01:01:24 - 01:01:27
EN: ut I think the forces are the same as in a Wedge,
01:01:27 - 01:01:29
EN: and I would treat it like a Wedge and sell,
01:01:29 - 01:01:31
EN: looking for at least a couple legs sideways to down.
Slide 033
Time: 01:01:35
Bilingual Transcript
01:01:36 - 01:01:41
EN: Just a reminder, I have two websites, the Brooks Trading Course website
01:01:41 - 01:01:44
EN: – which also has my daily blog, and that’s this website
01:01:44 - 01:01:49
EN: – and then I have the Brooks Trading Room at brookspriceaction.com.
Slide 034
Time: 01:01:53
Bilingual Transcript
01:01:53 - 01:01:56
EN: I began by talking about what I mean by price action.
01:01:56 - 01:01:59
EN: Price action is just movement on the chart.
01:01:59 - 01:02:02
EN: Traders look for patterns, and with experience
01:02:02 - 01:02:06
EN: they can anticipate what will happen after a pattern forms.
01:02:07 - 01:02:09
EN: I said I was going to be talking about three patterns.
01:02:09 - 01:02:11
EN: The first was a strong bull trend.
01:02:11 - 01:02:14
EN: When a trend is strong, I only want to look to buy.
01:02:14 - 01:02:19
EN: The second pattern that every trade should know is a pullback
01:02:19 - 01:02:22
EN: in a strong bull trend, and again, a trader should only look to buy.
01:02:23 - 01:02:25
EN: And then third, I talked about Wedges.
01:02:25 - 01:02:28
EN: Wedges can be top, they can be a bottom,
01:02:28 - 01:02:30
EN: they can be a bull flag, they can be a bear flag.
01:02:30 - 01:02:34
EN: And finally, I talked about my two websites.
01:02:37 - 01:02:38
EN: I’m Al Brooks.
01:02:38 - 01:02:40
EN: I want to thank you for watching this video.
01:02:40 - 01:02:41
EN: I hope you found it helpful.
01:02:41 - 01:02:44
EN: Three patterns every trader and every investor should know.