al-brooks-course
16 - ii, ioi, OO Patterns- Examples
Raw transcript and slide notes for 16 - ii, ioi, OO Patterns- Examples.
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Transcript 001
Time: 00:02
Bilingual Transcript
00:02 - 00:05
EN: I’m Al Brooks. I want to thank you very much for watching this video.
00:05 - 00:13
EN: This is the second of two videos on small patterns, ii, ioi, and OO.
00:13 - 00:16
EN: In this video, I’m going to give some examples.
Slide 001
Time: 00:18
Bilingual Transcript
00:20 - 00:24
EN: I’ll begin by talking about ii patterns, consecutive Inside Bars.
00:24 - 00:29
EN: An Inside Bar has a high at or below the high of the prior bar
00:29 - 00:32
EN: and a low at or above the low of the prior bar,
00:32 - 00:36
EN: and if you have two of them in a row, you have inside-inside.
00:36 - 00:38
EN: You have an ii pattern.
00:38 - 00:44
EN: An ioi pattern is an Inside Bar following an Outside Bar.
00:44 - 00:49
EN: An Outside Bar has a high at or above the high of the prior bar
00:49 - 00:52
EN: and a low at or above the low of the prior bar,
00:52 - 00:56
EN: and therefore the bar before the Outside Bar is inside of the Outside Bar.
00:57 - 00:59
EN: If you have an Inside Bar following an Outside Bar,
01:01 - 01:06
EN: the bar before is inside, so you have inside-outside-inside (ioi).
01:06 - 01:11
EN: And finally, I’ll talk about OO patterns, consecutive Outside Bars.
01:14 - 01:17
EN: Here are some examples of ii patterns.
Slide 002
Time: 01:19
Bilingual Transcript
01:21 - 01:24
EN: We have a strong rally here,
01:24 - 01:27
EN: and then we have an Inside Bar and a second Inside Bar.
01:27 - 01:30
EN: It does not matter that the lows are exactly the same
01:30 - 01:32
EN: and the highs are exactly the same.
01:32 - 01:36
EN: Remember, an Inside Bar has a high at or below the high of the prior bar
01:36 - 01:39
EN: and a low at or above the low of the prior bar,
01:39 - 01:43
EN: so this bar is inside of that, and this bar is inside of that.
01:44 - 01:48
EN: It’s coming at the end of a Buy Climax, and Buy Climaxes sometimes end
01:48 - 01:55
EN: with ii patterns – or OO’s or ioi’s, but of those three, most often,
01:55 - 01:59
EN: if you’re going to get a reversal in a Buy Climax, it’ll be from an ii.
02:00 - 02:03
EN: If you’re looking to sell, you want the second bar to be a bear bar,
02:03 - 02:08
EN: and you prefer to close near the low of the bar, at least in the lower third.
02:08 - 02:11
EN: If you’re long, you get out below that bear bar.
02:12 - 02:14
EN: And if you’re willing to take the swing down,
02:14 - 02:17
EN: it’s a reasonable sell below the low of that bar.
02:17 - 02:21
EN: From the first video, I talked about how the math is good for these patterns.
02:21 - 02:25
EN: If you sell below the low of the bar, you put your stop above the top of the ii
02:25 - 02:29
EN: or the top of the trend, and your risk is not very big,
02:29 - 02:32
EN: and your reward can be very large.
02:32 - 02:35
EN: So you have an excellent risk/reward ratio,
02:35 - 02:39
EN: and the probability of these patterns is about 50%, sometimes 60%.
02:39 - 02:43
EN: So let’s say it’s 50% chance that you’ll get a swing down,
02:43 - 02:47
EN: and the reward potential can be many times greater than the risk.
02:47 - 02:52
EN: And therefore, a pattern like this has a very good Trader’s Equation.
02:52 - 02:54
EN: It’s a very good trade.
02:54 - 02:57
EN: Some traders will enter below the low of the bar.
02:57 - 03:00
EN: Some will wait for 2 or 3 bear bars and then start to short.
03:01 - 03:04
EN: Once you have consecutive big bear bars breaking out,
03:04 - 03:08
EN: it’s high probability that we’re going lower, maybe a Measured Move down.
03:08 - 03:11
EN: By breaking out, I mean a close below the low of the prior bar.
03:11 - 03:13
EN: This is a breakout bar as well.
03:13 - 03:15
EN: It closed below the low of that bar.
03:15 - 03:19
EN: But this is an exceptionally big bar, closing far below support.
03:19 - 03:22
EN: The bulls wanted a Double Bottom with this low and that low,
03:22 - 03:24
EN: and they wanted this to be a pullback
03:24 - 03:26
EN: to the Moving Average and a test of this high.
03:26 - 03:31
EN: They wanted the bull trend to continue, and instead we went Outside Down.
03:31 - 03:33
EN: We had a big bar closing on its low,
03:33 - 03:36
EN: and then we had a second consecutive big bar closing on its low.
03:36 - 03:40
EN: The math is very good for shorting below these consecutive bear bars.
03:40 - 03:41
EN: It’s a bear surprise.
03:41 - 03:45
EN: However, the risk is big, the stop is further away,
03:45 - 03:48
EN: you’re later in the trend, and the reward is less.
03:48 - 03:51
EN: But the probability is higher shorting that than it is this.
03:55 - 03:59
EN: Reasonable to sell below the low of the bear bar in the ii.
03:59 - 04:03
EN: If it was a bull bar, a lot of traders would wait for a bear bar here
04:03 - 04:05
EN: or here or here and then short.
04:06 - 04:07
EN: Because if it’s a bull bar,
04:07 - 04:10
EN: the probability is less that you’re going to get a swing down.
04:15 - 04:19
EN: Then we have a very climactic selloff, and then an Inside Bar,
04:19 - 04:21
EN: and the bar after it is an Inside Bar.
04:21 - 04:23
EN: So now we have an ii pattern.
04:23 - 04:27
EN: If this second Inside Bar was closing on its low,
04:27 - 04:30
EN: many traders would wait to sell above a bull bar.
04:30 - 04:33
EN: Maybe this bar, maybe above that bar.
04:33 - 04:35
EN: But this is a reversal bar.
04:35 - 04:40
EN: It went down, it was up, it has a small bear body, but it’s still a reversal bar.
04:40 - 04:42
EN: Some traders will sell above the high of that bar,
04:42 - 04:46
EN: which is the normal location for entering on an ii.
04:46 - 04:52
EN: You sell 1 tick above the second Inside Bar; you buy 1 tick above the high
04:52 - 04:56
EN: of the Inside Bar or you sell on a stop 1 tick below.
04:56 - 04:59
EN: However, this is a Sell Climax and we have a big bull bar here.
04:59 - 05:03
EN: We have a Micro Double Bottom, down and up, down and up.
05:03 - 05:06
EN: I think fewer traders will sell below the low of that bar.
05:06 - 05:08
EN: If the next bar is a bear bar closing on its low,
05:08 - 05:12
EN: they might sell below that because then the probability would be better.
05:13 - 05:14
EN: Here we have a Sell Climax.
05:14 - 05:19
EN: You look to the left, maybe a Double Bottom with the earlier low of the day.
05:19 - 05:22
EN: A Micro Double Bottom and then it’s a Micro Triple Bottom
05:22 - 05:25
EN: – down and up, down and up, down and up.
05:26 - 05:28
EN: It’s reasonable to buy above the high of that Inside Bar,
05:28 - 05:32
EN: or above the higher of the two bars, with this bar being a bull bar closing
05:32 - 05:36
EN: in its upper third, or wait for a second or third bull bar and then buy.
Slide 003
Time: 05:40
Bilingual Transcript
05:44 - 05:48
EN: I talked a moment ago about how the patterns in general are small.
05:48 - 05:50
EN: This is a relatively big pattern.
05:50 - 05:53
EN: Here it’s a relatively small pattern.
05:53 - 05:56
EN: The distance from the bottom of the pattern to the top of the pattern is small,
05:56 - 05:59
EN: so if you’re shorting below, your stop is not very big,
05:59 - 06:03
EN: and the reward is very big relative to that small risk.
06:07 - 06:13
EN: So very good risk/reward, and the probability is often 50% to 60%.
06:13 - 06:18
EN: Excellent Trader’s Equations, so these are very good setups.
Slide 004
Time: 06:20
Bilingual Transcript
06:21 - 06:23
EN: We had a very strong bull breakout here.
06:23 - 06:27
EN: You can call it a spike up and then a Trading Range,
06:27 - 06:30
EN: and then we’re in a channel – three legs up, one, two, three.
06:30 - 06:31
EN: And then look at this.
06:31 - 06:33
EN: We have a pair of Inside Bars.
06:33 - 06:38
EN: Remember, I said that if you have one of these small patterns late in a bull trend,
06:38 - 06:44
EN: 20-30 bars into a bull trend, it often means the trend is going to end soon,
06:45 - 06:48
EN: and it could end by leading to a reversal down;
06:48 - 06:55
EN: it can end by going up and failing within 1, 2, 3, or 4 bars and reversing down.
06:55 - 06:58
EN: In this case, what it did was it broke above the top.
06:58 - 07:03
EN: I said before, in general, if you’re looking to buy with a stop,
07:03 - 07:05
EN: it’s better to buy above a bull bar closing on its high.
07:05 - 07:09
EN: This is a bear bar, and therefore, in general,
07:09 - 07:11
EN: it’s probably not worth taking that buy.
07:11 - 07:14
EN: Also, if you think about it, some bulls bought this close;
07:14 - 07:18
EN: they were disappointed by this bear bar, disappointed by this bear bar.
07:18 - 07:21
EN: There might be a lot of bulls trying to get out of longs right around
07:21 - 07:23
EN: that close where they bought.
07:23 - 07:28
EN: That increases the chances that if we go up to that close or near that close,
07:28 - 07:30
EN: we’ll get a reversal, and we have a little reversal there.
07:31 - 07:32
EN: This is an ii.
07:32 - 07:34
EN: Theoretically it’s a buy.
07:34 - 07:37
EN: I would wait to see if this bar, the entry bar, closed on its high,
07:37 - 07:40
EN: and then buy above the high of the entry bar.
07:40 - 07:44
EN: It’s still a BreakOut Mode pattern, and traders will sell below the low.
07:44 - 07:48
EN: So some traders will buy above the top, reverse to short below the low,
07:48 - 07:49
EN: below the lower of the two bars
07:49 - 07:52
EN: or below a bear bar closing near its low here or here.
07:52 - 07:56
EN: I would go short below the low of this bar.
08:01 - 08:03
EN: Spike, pullback, channel.
08:03 - 08:07
EN: A Spike and Channel bull trend, 75% of the time, has a bear breakout,
08:07 - 08:10
EN: a break below the bull trend line, and a test down,
08:10 - 08:14
EN: and then either a Trading Range or a conversion into a bear trend.
08:14 - 08:18
EN: If it’s a Trading Range, it then can resume up;
08:18 - 08:22
EN: ii in this case, we broke above the top and we reversed down.
08:22 - 08:25
EN: It was the final bull flag, so this is a final bull flag top.
08:30 - 08:32
EN: It’s also a Micro Double Top.
08:32 - 08:33
EN: It’s a Micro Triple Top.
08:33 - 08:37
EN: We went up, we went down, we went up, we went down, we went up again.
08:37 - 08:40
EN: I would call it a Micro Double Top with this high and that high.
08:40 - 08:45
EN: I think this tail is caused by the bulls who bought here being disappointed
08:45 - 08:49
EN: by these bear bars and getting out around breakeven,
08:49 - 08:54
EN: and bears expecting the bulls to give up and the bears placed limit orders
08:54 - 08:57
EN: to sell above that bear bar or around that close.
08:57 - 08:59
EN: These 2 consecutive bear bars closing
08:59 - 09:02
EN: near their lows represent the final bulls giving up.
09:10 - 09:15
EN: A pair of consecutive Inside Bars 10, 20, 30 bars into a bull trend.
Slide 005
Time: 09:10
Bilingual Transcript
09:15 - 09:17
EN: A possible final bull flag, especially
09:17 - 09:23
EN: since it’s also a possible Wedge – one, pause, two, pause, three.
09:23 - 09:25
EN: Very often the third leg up will fail and reverse down.
09:25 - 09:28
EN: It’s reasonable to buy above this ii.
09:28 - 09:31
EN: The second bar is a bull bar closing near its high.
09:31 - 09:33
EN: This is a Small Pullback Bull Trend.
09:33 - 09:36
EN: It could go up much further before you finally have a reversal.
09:37 - 09:40
EN: If a person did buy on a stop above the high of that bar,
09:40 - 09:43
EN: he would get out below of this bear reversal bar,
09:43 - 09:47
EN: and a person who’s flat would look to short below that bear bar,
09:47 - 09:50
EN: even though it has not fallen below the ii.
09:50 - 09:52
EN: Some traders will wait for consecutive bear bars,
09:52 - 09:56
EN: like that, because this bear bar does not have a very big body.
09:56 - 09:59
EN: But given that it’s a Wedge ii late in the bull trend,
09:59 - 10:03
EN: a possible final bull flag, I would short below
10:03 - 10:05
EN: that bear bar or below that or below that.
10:05 - 10:07
EN: But I would not hesitate shorting below that.
10:07 - 10:12
EN: Some traders will short on the breakout below the ii, which is below that bar.
10:12 - 10:15
EN: That’s about the same price as shorting below that bar.
10:15 - 10:17
EN: And here we got a couple legs down.
10:17 - 10:18
EN: Not a big swing.
10:22 - 10:25
EN: Reasonable to sell below the reversal bar,
10:25 - 10:29
EN: below a bear bar closing near its low, below another bear bar closing near its low.
10:29 - 10:32
EN: If you take that short, your stop is up here.
10:32 - 10:37
EN: You’re looking for two legs down from a Buy Climax, so one, pullback, and two.
10:38 - 10:43
EN: Some bears will give up above this bar, a bull bar closing near its high.
10:43 - 10:44
EN: Here’s a second one.
10:44 - 10:47
EN: But they could hold short and keep a stop up here.
10:47 - 10:51
EN: The bears who gave up sold again below that bear bar closing near its low,
10:51 - 10:55
EN: a Wedge Lower High, a Wedge bear flag, and we got a little bit more down.
Slide 006
Time: 11:00
Bilingual Transcript
11:03 - 11:08
EN: A very climactic selloff and then a pair of Inside Bars.
11:08 - 11:11
EN: Both bull bodies, and the second one closing on its high.
11:11 - 11:13
EN: A lot of Trading Range trading,
11:13 - 11:16
EN: a lot of Trading Range breakouts, fail and reverse.
11:16 - 11:18
EN: This is a Micro Double Bottom.
11:18 - 11:21
EN: It went down, it went up, it went down here and up again,
11:21 - 11:23
EN: so it’s a second reversal up.
11:23 - 11:28
EN: On a smaller timeframe chart, an ii is usually a Triangle.
11:29 - 11:32
EN: So on this timeframe, there’s at least a Micro Double Bottom
11:32 - 11:34
EN: and a pair of very good bull bars,
11:34 - 11:36
EN: so it’s reasonable to buy above the high of that bar.
11:36 - 11:39
EN: In fact, you could buy above the high of any of these bars
11:39 - 11:43
EN: closing on their highs – that bar, this bar, that bar, this bar, that bar.
11:43 - 11:44
EN: Maybe that bar.
11:45 - 11:49
EN: This is a Trading Range open, and we have a bear breakout.
11:49 - 11:53
EN: Tail here, tail here, so traders are buying, they’re buying,
11:53 - 11:57
EN: they’re buying, they’re buying, and the bear breakout appears to be failing.
11:57 - 12:00
EN: So it’s a credible opening reversal up from a Sell Climax.
12:01 - 12:05
EN: This low is probably a test of some support.
12:05 - 12:07
EN: Maybe yesterday’s low.
12:11 - 12:16
EN: ii, both with decent size bull bodies, the second one closing on its high.
12:17 - 12:20
EN: That makes this a higher probability reversal.
12:20 - 12:24
EN: Remember I said ii’s are often 50% to 60%.
12:24 - 12:27
EN: This is probably a 60% bet that we’ll get a couple legs up.
12:27 - 12:32
EN: It could be one, pullback, two, or it could be a complex one, pullback, two.
12:33 - 12:37
EN: When you get these reversals from selloffs on the open,
12:37 - 12:39
EN: the market usually tries to get all the way up
12:39 - 12:42
EN: to the top of the Sell Climax, which it did.
12:45 - 12:48
EN: Bulls will buy above bull bars closing on or near their highs.
12:48 - 12:53
EN: We have something of a Wedge Top – one, two, three, or one, two, three, four,
12:53 - 12:57
EN: or a failed breakout above a Wedge, a test of the top of the Trading Range.
12:58 - 12:59
EN: Decent bear bar.
12:59 - 13:00
EN: This is actually an ioi.
13:00 - 13:03
EN: This is an Inside Bar after an Outside Bar.
13:03 - 13:05
EN: It’s a bull bar, so not a great short.
13:05 - 13:08
EN: Some traders will sell below the low of this bear bar;
13:08 - 13:12
EN: some traders will wait for a second bear bar, maybe sell below that.
13:12 - 13:14
EN: This is a very Tight Bull Channel.
13:14 - 13:17
EN: Therefore, most traders are not eager to sell.
13:17 - 13:21
EN: They’ll want it to go sideways first and then they’ll look to sell,
13:21 - 13:23
EN: so they might be selling below that.
13:23 - 13:26
EN: Here we have a bear surprise, terrible follow-through.
13:26 - 13:28
EN: Not an easy sell below that.
13:28 - 13:31
EN: A lot of risk and lower probability after the 2 bull bars.
13:32 - 13:37
EN: But the main thing is, ii here, credible buy for a swing up,
13:37 - 13:43
EN: and then a Parabolic Wedge Top at the top of a Trading Range, and we have an ioi.
13:43 - 13:46
EN: At a minimum, get out of longs, and possibly short.
Slide 007
Time: 13:50
Bilingual Transcript
13:53 - 14:00
EN: A Sell Climax on the open, and we have an Inside Bar after an Outside Bar.
14:00 - 14:02
EN: So this is an ioi.
14:02 - 14:06
EN: So we have an Outside Bar – that means the bar before is inside,
14:06 - 14:09
EN: so we have an inside-outside-inside, ioi.
14:09 - 14:11
EN: And it’s also an ii.
14:11 - 14:14
EN: If you want, you can call it an ioii.
14:14 - 14:15
EN: You can call it just an ioi.
14:15 - 14:17
EN: You can call it an ii.
14:17 - 14:18
EN: It doesn’t matter what you call it.
14:18 - 14:22
EN: Remember, these are all potential reversal patterns.
14:22 - 14:25
EN: Therefore, it doesn’t matter what name you give; you just look for price action.
14:26 - 14:29
EN: You’re looking at this as a second attempt to reverse up.
14:29 - 14:31
EN: We tried to reverse up here, didn’t get very far.
14:31 - 14:33
EN: We’re reversing up a second time here.
14:33 - 14:36
EN: That makes it a higher probability buy,
14:36 - 14:38
EN: but we don’t have very good-looking buy signal bars.
14:38 - 14:42
EN: It’s reasonable to buy above this bull bar closing just above the midpoint.
14:42 - 14:44
EN: Higher probability to buy above that bar.
14:44 - 14:48
EN: Consecutive bull bars, one with a bigger body closing on its high.
14:48 - 14:52
EN: This close is right around that high, maybe a little bit above.
14:55 - 14:58
EN: Bulls will start buying above bull bars closing on their highs.
14:58 - 14:59
EN: You might buy above that bar.
14:59 - 15:03
EN: Here, a bull bar closing near its high, another bull bar closing near its high,
15:03 - 15:04
EN: bull bar closing near its high.
15:04 - 15:05
EN: Consecutive big bull bars.
15:05 - 15:06
EN: A bull surprise.
15:06 - 15:08
EN: We’ll probably get at least a second leg up.
15:08 - 15:10
EN: Here we got a third leg up.
Slide 008
Time: 15:15
Bilingual Transcript
15:16 - 15:18
EN: 3 consecutive Inside Bars.
15:18 - 15:22
EN: Now, the lows are identical on all 3 bars.
15:22 - 15:24
EN: The highs are identical on all 3 bars.
15:25 - 15:28
EN: It’s an ii here, and now it’s an iii.
15:28 - 15:34
EN: But this second bar has a low at or below the low of the prior bar.
15:35 - 15:38
EN: It has a high at or above the high of the prior bar,
15:38 - 15:40
EN: and therefore it’s an Outside Bar.
15:41 - 15:45
EN: Therefore, in addition to this being iii, it’s also ioi.
15:46 - 15:50
EN: And remember, this is an Outside Bar, but this also qualifies as an Outside Bar
15:50 - 15:53
EN: because its low is at or below the low of the prior bar.
15:53 - 15:56
EN: Its high is at or above the high of the prior bar.
15:56 - 16:01
EN: So it’s an inside-outside-inside, it’s inside-inside-inside,
16:01 - 16:06
EN: and it’s inside-outside-outside, so outside-outside (OO).
16:06 - 16:07
EN: So it’s all three.
16:07 - 16:10
EN: And again, it doesn’t matter what you call it.
16:11 - 16:15
EN: We have a selloff, a Trading Range, and a bull bar closing near its high,
16:15 - 16:19
EN: so traders will start to buy above bull bars closing near their highs,
16:19 - 16:20
EN: hoping for a reversal up.
16:21 - 16:23
EN: You can keep buying all the way up.
Slide 009
Time: 16:30
Bilingual Transcript
16:32 - 16:36
EN: A bear trend, and we have a pair of Inside Bars,
16:36 - 16:40
EN: consecutive Outside Bars, but these 2 bars have small bodies.
16:40 - 16:44
EN: They’re dojis, and they’re following just a couple bars after 2 more dojis.
16:44 - 16:46
EN: So we’re starting to get dojis.
16:46 - 16:49
EN: When you get dojis late in a trend,
16:49 - 16:53
EN: it’s often a sign that the trend will soon transition into a Trading Range.
16:53 - 16:57
EN: We had many of them here, so this could be a possible Final Flag.
16:57 - 16:59
EN: So if we sell off, we might reverse back up to this area,
16:59 - 17:02
EN: or we could just reverse up for the remainder of the day.
17:02 - 17:10
EN: And now we have an ii, but remember when I talked in the definitions about
17:10 - 17:15
EN: if you have a Tight Trading Range, in general, ii patterns are less reliable.
17:16 - 17:20
EN: Here we have 4 of 5 bars being small doji bars.
17:20 - 17:21
EN: That’s a Limit Order Market.
17:21 - 17:24
EN: There might be more sellers above, more buyers below.
17:24 - 17:28
EN: Not good for a person looking for a trend, a stop order market.
17:29 - 17:31
EN: You can see it triggered the buy.
17:31 - 17:33
EN: It went above the second of the 2 Inside Bars.
17:33 - 17:37
EN: But then it triggered the sell and went below the low of the ii,
17:37 - 17:40
EN: and then it went back above the top of the ii.
17:40 - 17:40
EN: Why?
17:40 - 17:42
EN: Because it’s a Limit Order Market.
17:42 - 17:44
EN: When you have these small sideways bars,
17:45 - 17:47
EN: there usually are more people willing to buy
17:47 - 17:50
EN: below than there are traders looking to sell with stops below.
17:51 - 17:54
EN: There usually are more people willing to sell with limit orders above
17:54 - 17:57
EN: than people willing to buy with stops above.
17:57 - 18:02
EN: So it’s an ii pattern, but I would not trade it; ii’s in Tight Trading Ranges,
18:02 - 18:05
EN: they’re limit order patterns, not stop order patterns.
18:05 - 18:07
EN: So I would not take that trade.
18:11 - 18:14
EN: So first reversal up, second reversal up,
18:14 - 18:19
EN: but at this point we have 4 consecutive dojis, 6 of the past 7 bars dojis.
18:19 - 18:20
EN: It’s a Limit Order Market.
18:20 - 18:22
EN: Not good for stop order trades.
18:22 - 18:25
EN: And then we had a bear bar closing near its low
18:25 - 18:28
EN: after a couple attempts to bottom and reverse up.
18:28 - 18:31
EN: You will start to get bears selling below that, especially
18:31 - 18:34
EN: because we’re in a Small Pullback Bear Trend.
18:34 - 18:36
EN: Some will wait for a second bear bar and sell below that.
18:40 - 18:42
EN: 5 consecutive bear bars.
18:42 - 18:46
EN: Extreme selling, climactic, coming late in a bear trend.
18:46 - 18:48
EN: It’s often a climatic end of the trend.
18:48 - 18:53
EN: Also, these dojis and these dojis represent neutrality.
18:53 - 18:56
EN: The market thought this was a fair price and this was a fair price,
18:56 - 18:59
EN: and now we’re getting a climactic breakout below it.
18:59 - 19:03
EN: So back to those areas where the price is fair.
19:04 - 19:06
EN: We have an Outside Up bar.
19:06 - 19:08
EN: It’s reasonable to buy above that.
19:08 - 19:13
EN: I cannot tell if this high isbelow that high, at or below.
19:13 - 19:14
EN: It might be.
19:14 - 19:19
EN: If the high of this bar is at or below the high of that bar, then this is an ioi.
19:19 - 19:23
EN: Outside bar, Inside Bar, so inside-outside-inside.
19:23 - 19:25
EN: You could buy above the Inside Bar.
19:25 - 19:27
EN: Not a very good bar.
19:27 - 19:29
EN: Better to buy above a good bull bar closing near its high,
19:29 - 19:34
EN: so you buy above that or above any of these bull bars closing near their highs,
19:34 - 19:36
EN: hoping for a reversal up.
Slide 010
Time: 19:40
Bilingual Transcript
19:45 - 19:49
EN: A strong selloff on the open and a pair of Inside Bars.
19:49 - 19:51
EN: Theoretically, it’s a possible low of the day,
19:51 - 19:54
EN: and traders could buy above the high of that bear bar,
19:54 - 19:57
EN: Micro Double Bottom, down, up, down, up.
19:57 - 20:01
EN: As I said, an ii is usually a Triangle on a smaller timeframe chart,
20:02 - 20:06
EN: but I don’t like to buy above a bear bar, especially in a strong bear trend.
20:06 - 20:08
EN: I would rather wait to see if this is a bull bar
20:08 - 20:11
EN: closing on its high and buy above it.
20:11 - 20:15
EN: And for the bears, what they have is a failed bottom attempt
20:15 - 20:17
EN: and a bear bar closing below its midpoint,
20:17 - 20:20
EN: another bear bar closing at its midpoint.
20:20 - 20:23
EN: So bears might short below that bear bar or below the ii.
20:23 - 20:29
EN: I don’t like to sell with stops below a cluster of bars with big tails below.
20:29 - 20:33
EN: Those tails below mean that the market went down and went up.
20:33 - 20:36
EN: It went down, it went up, down, it went up, down, it went up.
20:36 - 20:41
EN: So that means bulls are buying when it’s low, and I don’t want to be selling.
20:41 - 20:46
EN: Also, remember what I said: an ii in a bear trend often leads to a reversal,
20:46 - 20:48
EN: and if it does not lead to a reversal
20:48 - 20:51
EN: and instead leads to a resumption of the bear trend,
20:51 - 20:56
EN: the ii very often is the final bear flag – the breakout below reverses,
20:56 - 20:59
EN: and then you get a swing up, at least a couple legs up.
20:59 - 21:01
EN: One, pullback, two.
21:01 - 21:02
EN: Here we got several legs up.
21:03 - 21:08
EN: That’s another reason to not sell below all of these dojis.
21:08 - 21:10
EN: It’s probably better to wait to buy a reversal up.
21:10 - 21:14
EN: You could buy above this bull bar or you could wait for two bull bars,
21:14 - 21:17
EN: especially a bull bar closing at or near its high,
21:17 - 21:19
EN: and buy above that, above that, above that, above that.
21:20 - 21:24
EN: Here, a little doji after two bear bars and two legs up.
21:24 - 21:27
EN: You’ll get fewer traders buying above that.
21:27 - 21:31
EN: Some will buy above that and more will buy above that, and you can see here,
21:31 - 21:35
EN: it’s a High 2 and a Higher Low – so low, Higher Low, Higher Low.
21:35 - 21:38
EN: A Higher Low Double Bottom, Major Trend Reversal,
21:38 - 21:40
EN: and a High 2 – High 1, High 2.
21:40 - 21:45
EN: And you can see when it went above this bar, traders were very eager to buy.
21:45 - 21:49
EN: The close of this bar and the open of that bar, there’s a gap.
21:49 - 21:52
EN: So as soon as this bar closed with a small bull body,
21:52 - 21:55
EN: traders just bought at the market, and the next bar opened
21:55 - 21:58
EN: above the close of that bar and it never traded down.
21:58 - 22:00
EN: So panic short covering.
22:03 - 22:05
EN: Final bear flag.
22:05 - 22:06
EN: We got a bear breakout.
22:06 - 22:08
EN: It went on for a few bars and a reversal up.
Slide 011
Time: 22:12
Bilingual Transcript
22:13 - 22:15
EN: Look at this.
22:15 - 22:18
EN: 3 Inside Bars, 3 Inside Bars, 3 Inside Bars.
22:19 - 22:23
EN: They’re all small Trading Ranges and they’re all BreakOut Mode patterns.
22:27 - 22:29
EN: It’s credible to sell below this.
22:29 - 22:30
EN: We have a bear Surprise Bar.
22:30 - 22:33
EN: We should get a second leg sideways to down.
22:33 - 22:36
EN: It’s possible that this is all we get, especially
22:36 - 22:38
EN: when we have a pretty good reversal bar here.
22:38 - 22:42
EN: So if I short below that, I’m going to get out of shorts
22:42 - 22:44
EN: above a bull bar closing near its high.
22:44 - 22:47
EN: And then we have another iii.
22:47 - 22:50
EN: So a very intensely sideways market.
22:51 - 22:54
EN: That reduces the chances that a breakout will be successful.
22:55 - 22:59
EN: I would not be selling below this bull bar.
23:00 - 23:01
EN: We’re in a Limit Order Market.
23:01 - 23:03
EN: Sideways for 3 bars here, 3 more bars here.
23:03 - 23:06
EN: Actually, this is sideways for about 7 bars.
23:06 - 23:07
EN: A Limit Order Market.
23:07 - 23:13
EN: Sideways for a lot of bars, a lot of bars with small bodies and prominent tails.
23:13 - 23:16
EN: Usually more traders willing to sell below and buy above.
23:17 - 23:18
EN: I would not take that short.
23:18 - 23:22
EN: And here we got a bear breakout and then an immediate reversal up,
23:22 - 23:26
EN: a 2-bar reversal – one, two – and a bull bar closing near its high.
23:26 - 23:29
EN: I would buy above that, and I definitely would buy above this,
23:29 - 23:34
EN: a reversal up with consecutive good-size bull bodies closing near their highs.
23:34 - 23:37
EN: We’re probably going to get at least a small second leg up.
23:37 - 23:39
EN: We’ll probably get some kind of a swing up.
23:42 - 23:44
EN: 4 dojis and a bull body.
23:44 - 23:46
EN: I don’t want to sell below that.
23:50 - 23:54
EN: And here we have iii, a bear bar closing near its low,
23:54 - 23:57
EN: but you’re right above support, the Moving Average,
23:57 - 24:00
EN: and this is about a 10-bar Tight Trading Range,
24:00 - 24:05
EN: small bodies, all overlapping one another, very prominent tails.
24:05 - 24:06
EN: Limit Order Market.
24:06 - 24:10
EN: More traders buying below bars than selling below with stops.
24:10 - 24:15
EN: More traders selling above bars than buying with stops above bars.
24:15 - 24:21
EN: So yes, it’s an ii – in this case, iii – BreakOut Mode pattern,
24:21 - 24:23
EN: but I think you’re better off not trading it.
24:23 - 24:25
EN: Here we have a small OO pattern.
24:25 - 24:29
EN: We have an Outside Bar and another Outside Bar.
24:29 - 24:31
EN: But again, a Tight Trading Range.
24:31 - 24:33
EN: You don’t want to be looking for a trend
24:33 - 24:34
EN: when the market’s in a Tight Trading Range,
24:34 - 24:38
EN: and therefore a BreakOut Mode pattern is meaningless.
Slide 012
Time: 24:45
Bilingual Transcript
24:45 - 24:50
EN: A bear trend, and we have an ii fairly late in a bear trend.
24:50 - 24:52
EN: It’s a bear bar closing near its low.
24:52 - 24:56
EN: Reasonable to sell below, and then – uh-oh, a doji bar.
24:56 - 24:59
EN: So we went down, we went up, we went down, we went up,
24:59 - 25:01
EN: and now we went up and we went down,
25:01 - 25:04
EN: and now we have 4 sideways bars and a doji bar.
25:04 - 25:08
EN: Once you start to get more bars in a Tight Trading Range
25:08 - 25:13
EN: and you start to get doji bars – small bodies, big tails – it reduces the chances
25:13 - 25:17
EN: that you’re going to get much of a move out of the BreakOut Mode pattern.
25:17 - 25:20
EN: Also, if the pattern is coming at the end of the day,
25:20 - 25:25
EN: the final 5 or 10 bars of the day, there’s not much time left for a big move,
25:25 - 25:28
EN: so the reward is small, and the probability is low
25:28 - 25:33
EN: because every one of these bars is a reversal – down and up, down and up,
25:33 - 25:35
EN: and then up and down and up and down.
25:36 - 25:38
EN: The market’s probably not going to go very far.
25:38 - 25:42
EN: So if you’re getting doji bars, sideways bars late in the day
25:42 - 25:47
EN: and it’s a BreakOut Mode pattern, it’s usually not worth taking.
25:47 - 25:48
EN: It’s low probability.
25:48 - 25:52
EN: Not much time left, so not a lot of time for a big reward.
25:52 - 25:55
EN: And these bars are relatively big, so the risk is big.
25:55 - 26:00
EN: So if you have bad risk/reward and low probability for a stop order trader,
26:00 - 26:05
EN: then it’s probably good risk/reward and good probability for a limit order trader.
26:05 - 26:10
EN: So it might make more sense to buy below the bars and sell above.
26:10 - 26:14
EN: But this late in the day, trading with limit orders is a dangerous thing to do.
26:15 - 26:16
EN: For me, I would let it go.
26:16 - 26:20
EN: I might take that short, but if I saw it starting to reverse back up,
26:20 - 26:24
EN: I would just buy back my shorts and call it quits.
26:24 - 26:28
EN: I might take this, a second reversal up, a bull bar closing near its high,
26:28 - 26:30
EN: but you can see it went up, and if it started to come down
26:30 - 26:35
EN: I would just get out breakeven or get out before it got down to my entry price.
26:39 - 26:42
EN: Doji bars at the end of the day lowers the probability
26:42 - 26:43
EN: that the market’s going to go very far.
26:43 - 26:47
EN: Every doji bar is a reversal, and if the market is reversing,
26:47 - 26:51
EN: especially reversing repeatedly, it’s probably not going to break
26:51 - 26:53
EN: into a trend at the end of the day.
Slide 013
Time: 27:00
Bilingual Transcript
27:00 - 27:04
EN: We’re in a bear trend, but possibly a third reversal attempt.
27:04 - 27:06
EN: We were trying to go up, trying to go up.
27:06 - 27:11
EN: This could be another attempt to go up, but it’s 2 doji bars.
27:11 - 27:13
EN: Small bodies, prominent tails.
27:13 - 27:15
EN: Usually not very good for stop order traders.
27:15 - 27:18
EN: We have a bull bar here and a bull bar there.
27:19 - 27:21
EN: Some traders will buy above the ii, taking a chance
27:21 - 27:23
EN: that it’s a Wedge and we’ll get a reversal day.
27:23 - 27:26
EN: Others will wait to see what the entry bar looks like
27:26 - 27:27
EN: and buy above the high of the entry bar,
27:27 - 27:30
EN: so they buy above that and get filled here.
27:30 - 27:32
EN: But if you get a reversal down here,
27:32 - 27:36
EN: a bear bar closing on its low or near its low, I would get out of longs.
27:37 - 27:38
EN: Would I short?
27:38 - 27:41
EN: After the 2 bull bars, I probably would wait for a second sell.
27:41 - 27:46
EN: Here we got a Micro Double Top, up and then down, up and then down again.
27:46 - 27:50
EN: So I would sell below the low of that bar and get filled over here,
27:50 - 27:53
EN: or below that bar and get filled below its low.
27:54 - 27:55
EN: Tight Bear Channel.
27:56 - 27:58
EN: Terrible for stop order bulls.
27:58 - 28:02
EN: When the market’s in a Tight Bear Channel, you don’t want to be buying
28:02 - 28:06
EN: with stops above bars because it’s a Small Pullback Bear Trend.
28:06 - 28:08
EN: That means pullbacks will be small.
28:08 - 28:11
EN: They’ll be a bar or two and not go very far.
28:11 - 28:15
EN: More likely sellers above bars than buyers above bars.
28:15 - 28:17
EN: You don’t want to be buying above bars.
28:20 - 28:21
EN: This is what I talked about.
28:21 - 28:25
EN: Micro Double Top – up, down, and then up here,
28:25 - 28:27
EN: and then a bear bar closing near its low,
28:27 - 28:29
EN: and it’s at the Moving Average in a bear trend.
28:33 - 28:35
EN: We’re rallying here, and we have
Slide 014
Time: 28:35
Bilingual Transcript
28:35 - 28:40
EN: – this high might be at or below that high, so ii here.
28:40 - 28:42
EN: We have consecutive Inside Bars here.
28:42 - 28:46
EN: We have a bull breakout reversing down, reversing down a second time,
28:46 - 28:48
EN: with a bear bar closing near its low.
28:48 - 28:51
EN: So some traders will sell below the low of that bar.
28:51 - 28:53
EN: This is a Tight Trading Range.
28:54 - 28:57
EN: Not all dojis, but a lot of small bodies.
28:57 - 28:59
EN: It’s really not very good trading.
28:59 - 29:01
EN: But you could argue a Wedge Top.
29:01 - 29:06
EN: We have three highs – one from yesterday; here’s the start of today, these dots.
29:06 - 29:10
EN: So one high, two highs, three highs, and then a Triangle.
29:10 - 29:12
EN: You could call it a Triangle, you could call it a Tight Trading Range.
29:12 - 29:17
EN: This ii could be a final bull flag, breakout and reversal down.
29:17 - 29:18
EN: Not great math.
29:19 - 29:21
EN: I would not buy above the ii.
29:21 - 29:24
EN: It’s a Tight Trading Range with a bear bar, so I don’t want to buy above it.
29:24 - 29:27
EN: Plus, it’s a third leg up – one, two, and three
29:27 - 29:31
EN: – so we might be at the top of a Wedge, creating a high of the day.
29:31 - 29:34
EN: But here, we’re getting a bear bar closing on or near its low.
29:34 - 29:36
EN: I would consider selling below that bar.
29:37 - 29:41
EN: But a Tight Trading Range that lasts a lot of bars like this,
29:41 - 29:44
EN: it’s not a very good stop order market.
29:44 - 29:45
EN: The probability is not very good.
29:45 - 29:51
EN: Remember I said for ii’s, OO’s, ioi’s, the probability is often 50% to 60%.
29:52 - 29:54
EN: This is probably 50% or less.
29:54 - 29:57
EN: However, it turned out to be a profitable short.
30:01 - 30:04
EN: Tight Trading Range, there’s really nothing to reverse.
30:04 - 30:08
EN: It’s not like it’s going up, you have a possible top,
30:08 - 30:10
EN: we’re going down and you have a possible bottom.
30:10 - 30:12
EN: It’s going sideways.
30:12 - 30:18
EN: We have a prior trend, but at some point you have to say, 5, 6, 7, 8 bars,
30:18 - 30:21
EN: it’s neutral, and there’s no trend to reverse.
30:24 - 30:26
EN: As I said, I would consider selling below that,
30:26 - 30:29
EN: but I would not be an enthusiastic seller.
30:32 - 30:35
EN: Now I want to move on and talk about ioi’s
30:35 - 30:38
EN: – an Outside Bar followed by an Inside Bar.
30:41 - 30:45
EN: It’s the same idea as ii’s and OO’s.
Slide 015
Time: 30:41
Bilingual Transcript
30:45 - 30:49
EN: You’re looking for a breakout, and if it comes late in a trend,
30:49 - 30:54
EN: it’s often a Final Flag, or it can be a reversal pattern.
31:00 - 31:03
EN: We have a bull Inside Bar closing near its high.
31:03 - 31:05
EN: The bar before it is an Outside Bar.
31:05 - 31:08
EN: It’s outside of that, so it’s an ioi BreakOut Mode pattern.
31:08 - 31:10
EN: It’s in a bull trend.
31:10 - 31:11
EN: It’s a Small Pullback Bull Trend.
31:11 - 31:14
EN: Small pullback, small pullback, small pullback.
31:14 - 31:15
EN: It’s a bull bar closing near its high.
31:15 - 31:19
EN: The bar after is a bull bar closing on its high.
31:19 - 31:22
EN: So I would buy above the high of that bar, hoping for a swing up.
31:22 - 31:29
EN: This is another example of an ioi where the bar after the Inside Bar
31:29 - 31:34
EN: is also an Inside Bar, so it’s both an ioi and an ii.
31:34 - 31:37
EN: This bar is inside of that, this is inside of the bear bar.
31:38 - 31:40
EN: You can call it an ioii.
31:40 - 31:40
EN: It doesn’t matter.
31:40 - 31:42
EN: It’s still a BreakOut Mode pattern,
31:42 - 31:45
EN: and it’s a pretty good bull bar here in a pretty strong bull trend,
31:45 - 31:46
EN: so I’m looking to buy.
31:47 - 31:50
EN: I want to buy above the high of that bar, above the high of that bar.
31:55 - 32:00
EN: And then here, we have an Inside Bar after an Outside Bar, so another ioi.
32:00 - 32:02
EN: Late in a bull trend.
32:02 - 32:04
EN: You could buy above the high of that bull bar,
32:04 - 32:08
EN: but I’m concerned that we’re starting to get a lot of dojis,
32:08 - 32:10
EN: and that often leads to a Trading Range.
32:10 - 32:14
EN: Also, look at the distance to the Moving Average here compared to here.
32:15 - 32:18
EN: Trends tend to get weaker as they mature,
32:18 - 32:20
EN: and therefore you’d expect it to get closer
32:20 - 32:22
EN: to the Moving Average before it resumes up.
32:22 - 32:26
EN: That further lowers the probability for the bulls buying above that.
32:26 - 32:29
EN: I would wait and not buy above the high of that bar.
32:29 - 32:31
EN: I’d wait to see if the entry bar is a bull bar
32:31 - 32:33
EN: closing on its high and then buy above.
32:33 - 32:36
EN: For example, here’s another ioi.
32:36 - 32:39
EN: This one’s at the Moving Average, so I would buy that,
32:39 - 32:41
EN: but you could also buy above the second bar,
32:41 - 32:44
EN: the entry bar closing on or near its high.
32:48 - 32:49
EN: Another ioi.
32:49 - 32:54
EN: This one’s at the Moving Average, and now we also have a Wedge bull flag,
32:54 - 32:59
EN: three legs down – one, bounce, two, bounce, and then three,
32:59 - 33:01
EN: and then we have a good buy signal bar.
33:01 - 33:05
EN: There’s also a small Double Bottom bull flag, that low and here,
33:05 - 33:07
EN: and it’s a test of this breakout point.
33:07 - 33:09
EN: There are several things going for the bulls here.
33:09 - 33:11
EN: That’s a credible buy.
33:11 - 33:15
EN: If you want higher probability, you can wait for a second bull bar – and we got it.
33:15 - 33:17
EN: So that’s even higher probability.
33:18 - 33:21
EN: Now, is this going to be a final bull flag?
33:22 - 33:22
EN: I don’t know.
33:22 - 33:24
EN: It’s still a pretty Small Pullback Bull Trend.
33:24 - 33:30
EN: Even though we were sideways for 10 bars, the actual size of the pullback is small.
33:30 - 33:32
EN: I’m not really looking for a major reversal.
33:32 - 33:34
EN: So is it a Final Flag?
33:34 - 33:39
EN: I’m only looking to buy at this point, until we start to see bears making money.
33:39 - 33:41
EN: This is a Small Pullback Bull Trend.
Slide 016
Time: 33:45
Bilingual Transcript
33:48 - 33:52
EN: Inside Bar after an Outside Bar, but doji, doji.
33:52 - 33:54
EN: The market’s losing momentum.
33:54 - 33:59
EN: We have a breakout above a Wedge and we have shrinking bull bodies.
33:59 - 34:01
EN: Here, smaller, smaller, smaller.
34:01 - 34:03
EN: We’re losing momentum.
34:03 - 34:05
EN: The bulls have a High 2 – High 1, High 2.
34:06 - 34:08
EN: You can simply call it a High 1.
34:08 - 34:10
EN: You could say this is the high and that’s a pullback.
34:10 - 34:16
EN: But with the doji, doji, doji, 2 small bars, I’m not too eager to buy.
34:16 - 34:18
EN: I want to buy more of a pullback.
34:18 - 34:24
EN: It’s reasonable to take that buy, but remember, these small patterns can reverse.
34:25 - 34:28
EN: Just like it’s a buy above that Inside Bar.
34:28 - 34:31
EN: If it reverses, traders will sell below the low of the pattern,
34:31 - 34:35
EN: which is that bear Outside Bar, or they’ll look for a bar
34:36 - 34:38
EN: with a bigger bear body closing near its low.
34:38 - 34:41
EN: This is a second Outside Bar; they’ll sell below that,
34:41 - 34:44
EN: or they’ll wait for 2 bear bars and sell below that and get filled over here.
34:45 - 34:47
EN: So a buy, but not a very good buy.
34:47 - 34:48
EN: A better sell.
34:49 - 34:52
EN: Then we start to get bear bars over here.
34:54 - 34:57
EN: Sell below that, sell below that.
34:57 - 35:02
EN: I don’t have it shown in, but we have an Outside Down bar here closing on its low,
35:02 - 35:03
EN: closing near the low of that.
35:03 - 35:05
EN: That’s a reasonably good sell.
35:06 - 35:09
EN: Look at the size of the reward if you held for a swing.
35:10 - 35:13
EN: If you sell below this bear bar, your stop is above the high of that bar
35:13 - 35:16
EN: or the high of the pattern, so very little risk.
35:16 - 35:19
EN: And even if the probability of a swing is only 50%,
35:19 - 35:22
EN: the reward is 10 times greater than the risk,
35:22 - 35:25
EN: and therefore the Trader’s Equation is excellent
35:25 - 35:29
EN: even though the probability is only about 50% that you’ll get a swing down.
Slide 017
Time: 35:35
Bilingual Transcript
35:36 - 35:37
EN: Very strong bull breakout.
35:37 - 35:39
EN: Possible Measuring Gap.
35:39 - 35:41
EN: This could be a breakout test of that.
35:41 - 35:42
EN: It could lead to a swing up.
35:43 - 35:47
EN: We have a bear Outside Bar, and then the next bar is a bull bar,
35:48 - 35:51
EN: and it’s closing above its midpoint but it has a fairly prominent tail,
35:51 - 35:56
EN: and we have a bear bar here, bear bar here, sideways now for 5 bars.
35:56 - 35:59
EN: It’s a buy, but that tail is not good.
35:59 - 36:01
EN: It lowers the probability.
36:01 - 36:06
EN: And whenever the buy signal bar is unusually big, that is another sign
36:06 - 36:11
EN: that the market might be more forming a Trading Range than resuming a bull trend.
36:11 - 36:14
EN: Yes, it’s a buy, but the entry bar has a tail
36:14 - 36:18
EN: and the follow-through bar has a bear body, so what are the bulls going to do?
36:18 - 36:22
EN: A lot of them will get out around breakeven, and that’s what took place here.
36:22 - 36:23
EN: A lot of the bulls gave up.
36:23 - 36:28
EN: They were disappointed by a bad buy signal bar, tail and a big bar,
36:28 - 36:31
EN: 2 bear bars here, and then the entry bar, tail,
36:31 - 36:34
EN: and the follow-through bar, a bear bar.
36:34 - 36:35
EN: So a lot of the bulls gave up.
36:35 - 36:36
EN: We got one more push up.
36:36 - 36:38
EN: You could buy this.
36:38 - 36:43
EN: We have an attempt by the bears to reverse down, but a 5-bar Tight Trading Range,
36:43 - 36:49
EN: all the bars with tails, 6 bars – I don’t think it’s very good stop order buying.
36:49 - 36:52
EN: And this Tight Trading Range became a final bull flag.
36:52 - 36:54
EN: We had a very strong breakout,
36:54 - 36:59
EN: but very often trends end with climaxes, and this is a Buy Climax.
36:59 - 37:02
EN: It’s also three legs up – one, pause, two, pause, three.
37:02 - 37:09
EN: Remember, I said any of these patterns – ioi, like that – this is almost an ii.
37:10 - 37:14
EN: We may be forming some kind of a final bull flag,
37:14 - 37:16
EN: final leg up, and then getting a reversal.
Slide 018
Time: 37:20
Bilingual Transcript
37:22 - 37:26
EN: Here we have an ioi in a Small Pullback Bull Trend.
37:26 - 37:29
EN: Just 1 bar pullback, 1 bar pullback.
37:29 - 37:32
EN: Probably not going to lead to a major reversal down.
37:32 - 37:35
EN: Theoretically it’s a sell below, but 3 dojis
37:35 - 37:39
EN: in a Small Pullback Bull Trend – I’m not going to sell below the low of that bar.
37:39 - 37:42
EN: And then you can say, well, if it goes below and then above that bar,
37:42 - 37:47
EN: you have a failed ii top, and therefore it’s an ii bull flag.
37:47 - 37:51
EN: But it’s also 3 doji bars fairly late in a bull trend.
37:51 - 37:55
EN: I’m not particularly eager to sell below or buy above.
37:56 - 38:00
EN: You could buy above the entry bar, but has a fairly conspicuous tail.
38:00 - 38:02
EN: Tail below.
38:02 - 38:04
EN: It looks like we’re forming a Tight Trading Range,
38:04 - 38:06
EN: so I would not sell below that,
38:06 - 38:12
EN: I would not buy above the ioi, and I would not be eager to buy above the entry bar.
38:12 - 38:15
EN: In fact, the next bar is another ioi.
38:15 - 38:16
EN: This bar is inside of that bar,
38:16 - 38:19
EN: so it looks like we’re forming a Tight Trading Range.
38:19 - 38:22
EN: These are not good setups.
38:22 - 38:24
EN: And now we have an OO pattern.
38:24 - 38:26
EN: We have an Outside Bar and a bigger Outside Bar.
38:27 - 38:31
EN: I might sell below that, but if you did, you’re disappointed
38:31 - 38:33
EN: that the entry bar is not very big,
38:33 - 38:36
EN: and the follow-through bar has a bull body turning up from the Moving Average.
38:36 - 38:38
EN: That’s not good.
38:38 - 38:40
EN: So a lot of the bears would give up above this.
38:40 - 38:44
EN: Bulls might buy, but you still have the problem of the Tight Trading Range.
38:44 - 38:46
EN: And then what took place on this bar?
38:46 - 38:49
EN: The bears who sold below that bar, who did not get out,
38:49 - 38:53
EN: were disappointed by the 2 bull bars turning up from the Moving Average,
38:53 - 38:55
EN: and they get out with a limit order around that close
38:55 - 38:58
EN: or around the low of that bar, and that caused that tail.
39:03 - 39:06
EN: ioi and then a second ioi, but Tight Trading Range.
39:07 - 39:10
EN: BreakOut Mode, but BreakOut Mode in a Tight Trading Range.
39:10 - 39:14
EN: It’s usually better not to enter with stops.
39:14 - 39:17
EN: It’s more of a Limit Order Market, so better to do nothing.
39:18 - 39:22
EN: Again, now we have an OO, but a Tight Trading Range.
39:26 - 39:29
EN: Now I want to talk a little bit about some OO patterns.
Slide 019
Time: 39:31
Bilingual Transcript
39:36 - 39:38
EN: I have several in this chart.
39:39 - 39:42
EN: This series of dashes represents the start of a new day.
39:43 - 39:49
EN: We’re early in a bull trend here, and we have an Outside Down bar followed
39:49 - 39:52
EN: by a bigger Outside Up bar, and this is one of those perfect patterns
39:52 - 39:56
EN: where we have a bull bar here, so some bulls bought above it,
39:56 - 39:58
EN: and then we have a bear bar Outside Down, closing on its low.
39:58 - 40:00
EN: Some bears short below it.
40:00 - 40:04
EN: And now we have an even bigger bull Outside Bar closing on its high.
40:04 - 40:08
EN: That’s a relatively high probability buy above that bar.
40:08 - 40:10
EN: The entry bar and follow-through not good,
40:10 - 40:13
EN: but if you take that buy, your stop is down here.
40:13 - 40:15
EN: Some bulls would get out below that bear bar,
40:15 - 40:19
EN: but this did not go below that bear bar, and that’s good for the bulls.
40:19 - 40:22
EN: The bears were trying to trap the bulls into a bad long;
40:22 - 40:26
EN: they were unable to go below that bear bar and force bulls out.
40:26 - 40:30
EN: Instead, we got that, and traders started to buy aggressively.
40:30 - 40:34
EN: And then up here, we have a lot of tails, a lot of overlap,
40:34 - 40:38
EN: and we have an Outside Up bar and then Outside Down bar.
40:38 - 40:41
EN: But this bear bar never went above that.
40:41 - 40:42
EN: It’s not a perfect pattern.
40:43 - 40:46
EN: It’s a Buy Climax, a failed breakout of that high,
40:46 - 40:49
EN: a spike, a spike up and channel.
40:49 - 40:51
EN: So it’s probably a Spike and Channel pattern.
40:51 - 40:53
EN: We might get a couple legs down
40:53 - 40:55
EN: – and we did, one, pullback, two, at the end of the day.
40:56 - 40:58
EN: The math is not great.
40:58 - 41:00
EN: If you’re in a Small Pullback Bull Trend,
41:00 - 41:03
EN: you don’t want to be selling far below the high
41:03 - 41:07
EN: because the pullbacks have been small, and now you’re selling far down,
41:07 - 41:09
EN: and it might be the end of the pullback.
41:09 - 41:14
EN: So yes, it’s a possible top, but that is not a great-looking trade.
41:14 - 41:15
EN: You’ve got a couple legs down.
41:15 - 41:20
EN: If you did not get out above this, you ended up losing money on the trade.
41:21 - 41:24
EN: Here, the bulls were hoping it’s a Double Bottom,
41:24 - 41:26
EN: a Higher Low Double Bottom.
41:27 - 41:28
EN: This is the start of the day.
41:28 - 41:30
EN: A lot of Trading Range trading.
41:30 - 41:33
EN: A couple consecutive bull bars closing near their highs.
41:33 - 41:35
EN: Probably Always In Long.
41:35 - 41:39
EN: We have 3 bear bars, but we did not go below this low.
41:39 - 41:42
EN: It’s still Always In Long, but it’s BreakOut Mode.
41:42 - 41:47
EN: I would not buy the first reversal up after the 3 bear bars in a Trading Range.
41:47 - 41:51
EN: But a second reversal up with a big bull bar closing on its high,
41:51 - 41:54
EN: a possible Double Bottom, Higher Low Major Trend Reversal
41:54 - 41:58
EN: – there’s the bottom of the trend and we got a rally,
41:59 - 42:03
EN: and this low is above that low, so it’s a Double Bottom Higher Low
42:03 - 42:05
EN: compared to that, and a good bull bar.
42:06 - 42:07
EN: That’s a credible buy.
42:07 - 42:09
EN: Some will wait for a second bull bar and buy that.
42:10 - 42:14
EN: If they don’t want to risk that much, some will buy a 50% pullback,
42:14 - 42:18
EN: which is this, or they’ll buy a resumption up after a 50% pullback.
42:18 - 42:20
EN: They’ll buy above that or above that.
42:27 - 42:32
EN: An OO pattern is an Expanding Triangle on a smaller timeframe chart.
42:32 - 42:38
EN: So we’re getting bigger bars, and that’s the exact opposite of an ii,
42:38 - 42:42
EN: where you’re getting smaller bars, and that represents a contracting Triangle
42:42 - 42:43
EN: on a smaller timeframe chart.
42:44 - 42:48
EN: A Triangle, whether it’s contracting or expanding, is a BreakOut Mode pattern.
42:48 - 42:52
EN: So an OO or an ii both are BreakOut Mode patterns.
42:57 - 42:59
EN: I talked about this.
42:59 - 43:02
EN: It’s probably an Expanding Triangle on a smaller timeframe chart.
43:02 - 43:04
EN: At a minimum, it’s a Micro Double Top.
43:04 - 43:08
EN: We went up here, we were down at the low of this bar, up at the high of that bar,
43:08 - 43:10
EN: and then reversal down a second time,
43:10 - 43:13
EN: and this low is the neckline of the Micro Double Top
43:13 - 43:17
EN: - up, down, up, and then we broke below the neckline.
43:17 - 43:19
EN: I would not sell below that.
43:19 - 43:22
EN: If you’re selling, you’d sell below a bear bar closing near its low.
43:28 - 43:30
EN: Every consecutive outside pattern
43:30 - 43:33
EN: is going to be a Micro Double Top or a Micro Double Bottom.
43:33 - 43:37
EN: I talked about that in the first video, the video on definitions.
43:37 - 43:41
EN: In fact, usually the OO patterns are Triangles,
43:41 - 43:44
EN: Expanding Triangles on a smaller timeframe chart.
43:46 - 43:49
EN: Here, sideways from here on.
43:50 - 43:51
EN: Here’s today’s open.
43:51 - 43:54
EN: It’s a continuation of this Trading Range.
43:54 - 43:56
EN: Not great for stop entry trading,
43:56 - 43:59
EN: but we’re getting bull bars closing near their highs here and here.
43:59 - 44:01
EN: Decent size bear bars.
44:01 - 44:03
EN: Those are trend types of bars,
44:03 - 44:08
EN: and therefore there’s an increased chance that we could get a breakout into a trend.
Slide 020
Time: 44:15
Bilingual Transcript
44:16 - 44:19
EN: We have an Outside Bar and then an Inside Bar.
44:19 - 44:24
EN: For the bulls, this is a pullback in a bull trend, so it’s a High 1 buy.
44:24 - 44:25
EN: It’s a bear bar.
44:25 - 44:25
EN: Not good.
44:25 - 44:27
EN: Some traders would buy above this bar.
44:27 - 44:31
EN: It’s the same high as that bar, but they’d buy above that,
44:31 - 44:34
EN: hoping for a High 1 bull flag and a rally.
44:34 - 44:38
EN: And they got a good Outside Up bar, so it’s a credible buy above that
44:38 - 44:40
EN: and it’s a credible buy above this.
44:40 - 44:41
EN: At this point, it’s an OO.
44:41 - 44:44
EN: This bar is outside of that, this bar is outside of that.
44:45 - 44:47
EN: But it’s late in a bull trend.
44:47 - 44:50
EN: I don’t have the bars over here, but let’s say it was late in the bull trend.
44:50 - 44:53
EN: You have to be thinking that we could get a top.
44:54 - 44:56
EN: It’s reasonable to buy above that.
44:56 - 44:58
EN: I would not sell below that.
44:58 - 44:59
EN: I would not sell below that.
45:00 - 45:02
EN: It’s reasonable to take this buy.
45:02 - 45:04
EN: I would rather wait to see what the entry bar looks like.
45:05 - 45:09
EN: This is a better buy, but because of the possibility of a bull trap,
45:09 - 45:12
EN: I personally would usually wait for one more bull bar,
45:12 - 45:15
EN: to see if we get one more bull bar to reduce the chances
45:15 - 45:18
EN: that it could be a bull trap – which it turned out to be.
45:19 - 45:22
EN: It’s reasonable to take that buy, but if you buy it,
45:22 - 45:23
EN: you have to get out below that.
45:23 - 45:27
EN: Most traders don’t like to reverse, but that’s an obvious reverse.
45:27 - 45:30
EN: If I bought above that, I’m going to sell below that,
45:30 - 45:33
EN: and I’ll probably more than make up the loss.
45:33 - 45:39
EN: So if I buy above that and I sell below this, I lost from here to here,
45:39 - 45:44
EN: and I’m expecting to make at least that much back, if not more.
45:45 - 45:48
EN: If I did not take this buy or that buy and then I see this
45:49 - 45:54
EN: – 3 consecutive Outside Bars, all with big bodies, I am going to short below that,
45:54 - 45:57
EN: or I’ll wait for a second bear bar and sell the close.
45:57 - 45:59
EN: And look what happened as soon as this bear bar closed.
45:59 - 46:00
EN: We sold off.
46:00 - 46:01
EN: Very little bounce.
46:01 - 46:05
EN: So a lot of traders waited to see if we’d get a second consecutive bear bar
46:05 - 46:09
EN: after the Outside Down bar, and then they sold the market, and we got that.
46:16 - 46:20
EN: The bears who did sell below this, they would either get out above the bear bar
46:20 - 46:24
EN: or above the bull bar, and they ended up being trapped into a bad short.
46:24 - 46:29
EN: And the bulls who bought above the OO got trapped into a bad long.
46:38 - 46:40
EN: 3 consecutive Outside Bars.
46:40 - 46:44
EN: Outside-outside, so it’s an OO here, and now it’s an OOO,
46:44 - 46:48
EN: and you’ve had clear trapped bulls here and here,
46:48 - 46:50
EN: trapped bears below that bear bar.
46:50 - 46:56
EN: Chances are the next breakout we get is going to be the start of a swing,
46:56 - 47:00
EN: so I am looking to sell, especially when I get a big bear bar closing near its low.
47:00 - 47:03
EN: This is a relatively high probability of a swing down.
47:03 - 47:07
EN: This is probably a 60% chance for a swing down.
47:12 - 47:16
EN: This is one of those ideal or perfect OO patterns.
47:17 - 47:23
EN: It ended up as an OOO, but you clearly had both trapped bulls and trapped bears,
47:24 - 47:27
EN: and that increases the chances that a breakout will be successful.
47:31 - 47:35
EN: Some bears sold below the low of that bull bar.
47:35 - 47:39
EN: Others waited for a bear bar closing near its low, and they sold below that.
Slide 021
Time: 47:45
Bilingual Transcript
47:46 - 47:50
EN: We have an Outside Bar and a second Outside Bar, so it’s an OO pattern,
47:50 - 47:54
EN: but these 3 bars are dojis, and so are these 2,
47:54 - 47:56
EN: so you have 5 consecutive doji bars.
47:57 - 47:58
EN: That’s a Limit Order Market.
47:59 - 48:02
EN: Every tail below a bar means that when the market went down,
48:02 - 48:03
EN: it immediately reversed up.
48:03 - 48:06
EN: When it went up, it immediately reversed down.
48:07 - 48:08
EN: So it’s a Limit Order Market.
48:08 - 48:09
EN: It’s reversing.
48:10 - 48:13
EN: That is a bad market for traders looking to enter with stops.
48:13 - 48:17
EN: So I would not buy above that bull bar;
48:17 - 48:19
EN: I would not sell below the low of that bull bar.
48:19 - 48:23
EN: 5 doji bars, I want to wait for the market to start trending
48:23 - 48:25
EN: before I take any stop order trades.
48:28 - 48:32
EN: A big Outside Down bar, bottom of the range.
48:32 - 48:35
EN: Some traders will start selling here, especially
48:35 - 48:38
EN: because the bulls who bought here or here are now trapped.
48:38 - 48:40
EN: Others will wait for a second entry.
48:40 - 48:42
EN: And even the second entry is not good.
48:42 - 48:44
EN: All these bars have prominent tails.
48:44 - 48:49
EN: In fact, the past 15 bars, past 20-30 bars, all have prominent tails.
48:49 - 48:51
EN: Usually you’re not going to get a strong trend.
48:51 - 48:55
EN: We got a pretty good swing down, but when I see a trend like that
48:55 - 48:58
EN: where all the bars have big tails and small bodies
48:58 - 49:03
EN: and there is a lack of consecutive big bear bars closing on their lows,
49:03 - 49:07
EN: the trend usually will not last all day.
49:07 - 49:10
EN: It usually ends up as a bear leg in a Trading Range,
49:10 - 49:14
EN: and you can see going into the close, we undid all of that selling.
49:14 - 49:17
EN: So this is not good stop order trading.
49:22 - 49:26
EN: At the low, we have an Outside Bar and then an Outside Down bar.
49:26 - 49:30
EN: But it’s late in a bear trend, and remember, any of these patterns
49:30 - 49:34
EN: – ii, ioi, OO – if they occur late in a trend,
49:35 - 49:38
EN: there’s an increased chance of them leading to a reversal
49:38 - 49:43
EN: or of a breakout in the direction of the trend – in this case, down
49:43 - 49:45
EN: – and the breakout failing and then the market reversing.
49:45 - 49:49
EN: So the pattern becomes a final bear flag.
49:49 - 49:53
EN: So I am not eager to sell below that bear bar closing near its low.
49:53 - 49:59
EN: Here we’re sideways for 7 bars, 6 bars, and all the way down, big tails below.
49:59 - 50:01
EN: So I’m looking for a reversal.
50:01 - 50:03
EN: I’m not going to sell below that bar.
50:03 - 50:07
EN: It’s late in the day, so it’s not really great to buy above the OO, either.
50:08 - 50:11
EN: You want to buy up here, we have a very big outside bull bar
50:11 - 50:14
EN: closing on its high – but you’re in a Limit Order Market.
50:14 - 50:15
EN: Lots of reversals.
50:15 - 50:18
EN: Do you really want to risk that much, this late in the day?
50:18 - 50:21
EN: So I would not do anything with this.
50:21 - 50:25
EN: I would not sell below, I would not buy above, and I would not buy above that.
50:25 - 50:26
EN: I would wait for tomorrow.
Slide 022
Time: 50:30
Bilingual Transcript
50:37 - 50:43
EN: This is a 15-minute Globex chart, and we have 3 consecutive Outside Bars
50:43 - 50:46
EN: and a very good bear bar closing near its low, so it’s a credible sell below.
50:47 - 50:49
EN: And then what do you do with this?
50:49 - 50:53
EN: Well, it’s a big enough bull bar reversing up from the Moving Average,
50:53 - 50:54
EN: I would get out of shorts.
50:54 - 50:58
EN: This is such a big bear bar, I probably would wait to see
50:58 - 51:01
EN: if we had a good entry bar for the bulls who bought above that.
51:01 - 51:02
EN: We did not.
51:02 - 51:04
EN: And now we have a second buy.
51:04 - 51:05
EN: I would take this.
51:05 - 51:08
EN: This is a second reversal up from the Moving Average,
51:08 - 51:13
EN: and after two attempts to go down – one and two – and a bull bar
51:13 - 51:17
EN: closing near its high, bull bar closing near its high, I would take this buy.
51:17 - 51:20
EN: But when you get sideways trading late in a bull trend,
51:20 - 51:23
EN: there’s an increased chance it’ll be the final bull flag.
51:23 - 51:28
EN: So if we do get a bull breakout, you’ve got to be thinking it might reverse down.
51:28 - 51:34
EN: If I take the buy above this bar and I see a bear bar closing on or near its low,
51:34 - 51:36
EN: I’m going to get out of longs because a lot of traders
51:36 - 51:39
EN: will view this as a possible Final Flag.
51:39 - 51:44
EN: A Tight Trading Range late in a bull trend and a Buy Climax and a decent bear bar.
51:44 - 51:48
EN: Traders will short below that bar, hoping for a swing down.
51:52 - 51:56
EN: Two legs down to the Moving Average – one, bounce, two
51:56 - 51:59
EN: – and a second strong reversal up with a good bull bar.
51:59 - 52:00
EN: It’s a credible buy.
52:07 - 52:09
EN: We have a failed breakout above the OO.
52:09 - 52:11
EN: We broke below; that failed.
52:11 - 52:13
EN: We’re breaking above; that’s failing.
52:13 - 52:18
EN: Reasonable to short below the low of that bear bar, and you get filled right there.
Slide 023
Time: 52:21
Bilingual Transcript
52:25 - 52:29
EN: We have an Outside Up bar, but after 3 big bear bars in a bear trend,
52:29 - 52:31
EN: I don’t want to buy above that bear bar.
52:31 - 52:34
EN: It did not go above the bull bar, and we have Outside Down,
52:34 - 52:37
EN: so Outside Up bull bar, Outside Down bear bar.
52:37 - 52:39
EN: But look to the left.
52:39 - 52:41
EN: We might be forming a Double Bottom.
52:41 - 52:43
EN: It might be near the bottom of a Trading Range.
52:43 - 52:46
EN: Three legs down – one, pullback, two, pullback, three,
52:46 - 52:50
EN: and a Micro Double Bottom – down, bounce, down.
52:51 - 52:53
EN: So I’m not eager to sell below the low of that bar.
52:54 - 52:58
EN: Remember, when you have any of these patterns late in a trend,
52:58 - 53:01
EN: there’s an increased chance of a reversal.
53:01 - 53:04
EN: With this being near the low of the day,
53:04 - 53:06
EN: there’s a possible Double Bottom or a Higher Low.
53:06 - 53:10
EN: I would wait to see what the entry bar below that bear bar looks like,
53:10 - 53:14
EN: and if it’s a second consecutive bear bar, then maybe short below that.
53:14 - 53:16
EN: But I think there’s too much risk of this reversing.
53:16 - 53:19
EN: A Wedge to a Higher Low Double Bottom.
53:20 - 53:22
EN: Possible Final Flag.
53:22 - 53:25
EN: So we break below it by a tick or so and reverse.
53:25 - 53:30
EN: This OO then is a small Final Flag, and it’s a small breakout and a reversal.
53:31 - 53:33
EN: Some traders will buy above that big tail.
53:33 - 53:36
EN: Others will wait for it to go above the OO and buy above that.
53:36 - 53:40
EN: Others will wait for a bull bar closing near its high and buy above that.
53:44 - 53:46
EN: Failed OO breakout.
53:46 - 53:49
EN: You can call it a small final bear flag.
Slide 024
Time: 53:55
Bilingual Transcript
53:55 - 53:58
EN: On the open, we have a Lower Low Double Bottom
53:58 - 54:00
EN: and then a pullback to a Higher Low.
54:00 - 54:02
EN: If you want, you can call it a Triangle open.
54:02 - 54:04
EN: You can call this a Double Bottom pullback,
54:04 - 54:08
EN: so a Double Bottom and then a reversal up and a pullback to a Higher Low.
54:08 - 54:10
EN: I’m looking to buy.
54:10 - 54:13
EN: I would buy above a big bull bar closing on its high,
54:13 - 54:15
EN: especially breaking above the trend line.
54:15 - 54:18
EN: Or you could wait for a second bull bar closing on its high.
54:18 - 54:23
EN: In this particular case, the second buy was an OO.
54:23 - 54:26
EN: We have an Outside Down bar here, an Outside Up bar here.
54:26 - 54:29
EN: It never went below the bear bar; instead, we went above
54:29 - 54:31
EN: and we have a bull bar closing near its high.
54:31 - 54:32
EN: This is a gap up open.
54:32 - 54:34
EN: Here’s the Moving Average.
54:34 - 54:35
EN: I’m looking to buy.
54:35 - 54:40
EN: We have 2 bull bars here, a Double Bottom reversal up here, a reversal down.
54:40 - 54:42
EN: Did not go below the stop.
54:42 - 54:45
EN: The bulls who bought above that or above that have a stop here,
54:45 - 54:48
EN: and this is a Double Bottom pullback.
54:48 - 54:49
EN: That’s a buy.
54:49 - 54:50
EN: I’m looking to buy.
54:50 - 54:51
EN: I’d buy above that.
54:51 - 54:53
EN: I would not be stopped out.
54:53 - 54:54
EN: Did not go below a strong bear bar.
54:54 - 54:59
EN: And if I did not buy, I would buy above that or that, looking for a swing up.
55:01 - 55:03
EN: This is a bull flag early in a bull trend.
55:03 - 55:05
EN: The bull trend began here.
55:09 - 55:11
EN: This is a daily chart.
Slide 025
Time: 55:10
Bilingual Transcript
55:12 - 55:16
EN: We have a very big bull bar, and it’s an Outside Bar,
55:16 - 55:20
EN: and the bar before, the day before, was a bear Outside Bar.
55:20 - 55:23
EN: So we have a bear Outside Bar and then a very big bull Outside Bar.
55:25 - 55:29
EN: This big rally is this big bull bar,
55:30 - 55:34
EN: and for the bulls, we have a bull trend and a pullback.
55:34 - 55:37
EN: You can call it a small Double Bottom, a Micro Double Bottom.
55:37 - 55:39
EN: You could also call it a Wedge; we went down here,
55:39 - 55:43
EN: we went up, down here, up, and then down here, up.
55:43 - 55:44
EN: Big risk.
55:44 - 55:48
EN: You’re buying above a very big bar, so the stop is far below.
55:49 - 55:52
EN: Pretty much sideways, so the probability is not all that good,
55:52 - 55:53
EN: but it is a credible buy.
55:53 - 55:56
EN: Some traders will wait for a second bar and then buy.
Slide 026
Time: 56:05
Bilingual Transcript
56:06 - 56:08
EN: Very strong rally on the open.
56:09 - 56:11
EN: Here’s the Moving Average, so it’s a gap up.
56:11 - 56:16
EN: We tried to reverse down here, and we tried to reverse down a second time here,
56:16 - 56:18
EN: but did not go below the low of that bar.
56:18 - 56:20
EN: Instead, we got a bull bar.
56:20 - 56:21
EN: A second Inside Bar.
56:21 - 56:24
EN: So we have an Inside Bar and a second Inside Bar.
56:24 - 56:26
EN: Theoretically, it’s a buy above the high of that bar
56:26 - 56:28
EN: with a stop below the low of that bar.
56:29 - 56:32
EN: Some bears would go short below the low of that bar.
56:32 - 56:34
EN: I’d wait for a couple consecutive bear bars.
56:34 - 56:39
EN: This is such a surprisingly big bull bar, chances are we’re going to go higher.
56:39 - 56:41
EN: So the bears have a Low 2.
56:42 - 56:46
EN: We went below this bear bar; that’s a Low 1, a first reversal down.
56:46 - 56:50
EN: We went below the low of this bull bar, and that’s a second reversal down.
56:50 - 56:53
EN: But I’m not willing to take that short.
56:53 - 56:58
EN: Now we have an ii, consecutive Inside Bars, and then we have a bear Outside Bar,
56:58 - 57:00
EN: and now we have a bull Outside Bar.
57:00 - 57:02
EN: I think the market’s Always In Long.
57:02 - 57:04
EN: This is a big enough bull surprise
57:04 - 57:06
EN: so that we should get at least a small second leg up.
57:06 - 57:09
EN: It’s possible that we get a bull trend.
57:09 - 57:14
EN: So I’m not selling below that bull bar, so I’m not going to get short here.
57:14 - 57:17
EN: You could take a short below that bear bar,
57:17 - 57:22
EN: a Micro Double Top – up, down, up – but I think this is so strong,
57:22 - 57:24
EN: we should get more of a second leg up.
57:24 - 57:27
EN: If we get a second bear bar closing near its low after that bar,
57:27 - 57:32
EN: I might sell below that bear bar, but instead we got Outside Up.
57:32 - 57:34
EN: So we have outside-outside.
57:34 - 57:36
EN: I would buy above this bull bar.
57:39 - 57:41
EN: Traders will buy above bull bars
57:41 - 57:45
EN: closing near their highs – above that, above that, above that.
57:45 - 57:47
EN: Here, it’s a possible Wedge – one, two, three.
57:47 - 57:51
EN: A lot of the bulls, if they bought above that, would get out below that,
57:51 - 57:54
EN: and then they’d wait for another bull bar closing near its high to buy again,
57:54 - 57:56
EN: and buy maybe above that.
Slide 027
Time: 58:00
Bilingual Transcript
58:00 - 58:05
EN: A bear trend, and we have Outside Down, and now Outside Up.
58:05 - 58:06
EN: 3 dojis.
58:06 - 58:08
EN: Not good for stop entry traders.
58:08 - 58:12
EN: A pretty good bull bar, so it’s a possible reversal,
58:12 - 58:16
EN: but with the 3 dojis, I think it lowers the probability.
58:16 - 58:19
EN: Whenever the probability is not as high as I want,
58:19 - 58:23
EN: instead of selling below the OO or buying above the OO,
58:23 - 58:26
EN: I want to wait to see what the breakout bar looks like.
58:26 - 58:29
EN: If it’s a strong bull breakout bar, then I’ll buy above that.
58:29 - 58:33
EN: If there’s a strong bear breakout bar, then I might sell below that.
58:33 - 58:35
EN: Here we have a couple consecutive bear bars.
58:35 - 58:37
EN: Theoretically it’s a sell below.
58:37 - 58:39
EN: I don’t like the tail, I don’t like the bull body,
58:39 - 58:42
EN: and I don’t like the market being this late in the day.
58:42 - 58:46
EN: Not much profit potential, and the probability is not all that high
58:46 - 58:48
EN: with that tail and that bull bar.
58:48 - 58:51
EN: So this is not really good for stop entry traders.
58:56 - 58:59
EN: You can argue it’s a failed bottom and therefore a bear flag,
58:59 - 59:03
EN: a Low 2 bear flag – Low 1, pullback, Low 2.
59:03 - 59:07
EN: Some bears will sell below a bear bar closing on its low, looking for a swing down.
59:07 - 59:09
EN: So they won’t think of this as an OO.
59:09 - 59:13
EN: They’ll simply think of it as a two-legged pullback to the Moving Average.
59:13 - 59:17
EN: A bad sell signal bar here, a bull doji after a big bull bar.
59:17 - 59:22
EN: But if you’re trading Always In, the market’s clearly Always In Short,
59:22 - 59:25
EN: and if you get out above that bull bar, we’re still Always In Short.
59:25 - 59:29
EN: Bears will look for a bear bar closing near its low and they’ll sell below.
59:29 - 59:32
EN: So you can take a short below that big bear bar,
59:32 - 59:34
EN: hoping for a resumption of the bear trend,
59:34 - 59:37
EN: but I think the math is not all that strong.
59:45 - 59:50
EN: We have an Outside Down bar, an Outside Up bar, but prominent tails,
Slide 028
Time: 59:45
Bilingual Transcript
59:50 - 59:56
EN: and we’re pretty late in the bear trend, and we have a lot of prominent tails here,
59:56 - 59:59
EN: small bodies, prominent tails here, small bodies.
59:59 - 01:00:02
EN: So the market thinks that this price is pretty fair.
01:00:02 - 01:00:05
EN: The market spent, I don’t know, almost an hour here,
01:00:05 - 01:00:08
EN: and now we’re getting more sideways bars with big tails.
01:00:08 - 01:00:11
EN: This is not a strong sell below that bear bar.
01:00:11 - 01:00:14
EN: You might sell below this bear bar closing in its bottom third,
01:00:14 - 01:00:20
EN: but too much risk that this is a final bear flag or that this is a final bear flag.
01:00:20 - 01:00:24
EN: So if we do go down, there probably will be profit-taking into the close.
01:00:24 - 01:00:27
EN: If I sold below that or below that,
01:00:27 - 01:00:29
EN: I would get out above a bull bar closing near its high,
01:00:29 - 01:00:32
EN: and aggressive bulls might buy looking
01:00:32 - 01:00:35
EN: for a swing back up to there or here into the close.
01:00:40 - 01:00:42
EN: It’s actually 3 consecutive Outside Bars.
01:00:42 - 01:00:44
EN: This bar is a small Outside Bar.
01:00:44 - 01:00:46
EN: Here’s a second, and here’s a third.
01:00:52 - 01:00:56
EN: First I talked about ii, consecutive Inside Bars examples.
Slide 029
Time: 01:00:55
Bilingual Transcript
01:00:56 - 01:01:01
EN: I then talked about ioi, an Outside Bar followed by an Inside Bar,
01:01:01 - 01:01:06
EN: and that means there’s an ioi, an Inside Bar before the Outside Bar.
01:01:06 - 01:01:08
EN: And then consecutive Outside Bars, OO.
01:01:08 - 01:01:14
EN: All of these patterns are BreakOut Mode patterns, and when they occur in trends,
01:01:14 - 01:01:16
EN: traders expect one of two things.
01:01:18 - 01:01:20
EN: First, they look for a reversal.
01:01:20 - 01:01:25
EN: If instead the trend resumes, they think the pattern is an area of agreement,
01:01:25 - 01:01:30
EN: and therefore the resumption of the trend usually does not get very far.
01:01:30 - 01:01:34
EN: So they’re either reversal patterns or Final Flags.
01:01:34 - 01:01:38
EN: So in a bear trend, a breakout below usually does not go down all that far;
01:01:38 - 01:01:40
EN: you get a reversal back up to it.
01:01:40 - 01:01:44
EN: In a bull trend, if you get a bull breakout, yes, it’s a BreakOut Mode pattern,
01:01:44 - 01:01:48
EN: it’s a bull flag, but usually the breakout’s not going to get all that far.
01:01:54 - 01:01:55
EN: I’m Al Brooks.
01:01:55 - 01:01:57
EN: Thank you very much for your attention.
01:01:57 - 01:01:58
EN: I hope that you found this helpful.