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I don’t understand the logic behind those 2 bar (in the blue square).
I mean, what was the reason? Trap traders, Simply a 2 leg down before another up?
what is yours explanation?
Thank you
Every trend bar breaks out of something and is a test. The bull bar was of very good size and is testing the previous breakout area. Those 2 bars specifically are bears attempting to reassert themselves at the breakout zone and to minimally target the bottom of the strong bull bar. That is the bears objective.
The bulls objective is to prevent that. When prices ticked lower and finish towards the top of the initial bull bar, you will note 2 things. It is a breakout test for the bulls and if they can move 1 tick above the highest bear bar, prices will launch higher very quickly. Why? Because that is where the bears stop will be and is similar to where the last trading range zone is. When the area breaks, both bulls and bears will agree that prices will move upwards, and ths is exactly what happened.
Hopefully helpful and good trades to you!
Hy Alessandro,
Like Eric said above, every trendbar is a brekout of something. Trendbars are spikes, Gaps , Climaxes. Here it was B3 or Spike 3 what braked out of something.
What i think is an important question: Out of what?
That depends how you see the market, or what are you looking at.
The market is either breaking out or not (if not, it is in a Trading Range). If you go deeper in the concept of the spike & channel trend you will know that after the spike the channel follows. That means Spike > Pull Back > Channel > Trading Range.
That is the same like 1st Leg (Spike) & 2nd (Channel) Leg.
If you start further at Spike 1 in the picture below, after Spike 1 usually a Channel is following, and the channel is the first Leg of the Trading Range. So the Red Box and the bars until Spike 2 is the Trading range who followed after Spike 1.
Spike 2 was the Breakout from this trading Range, the red box. After the spike a channel down followed and created the 1st Leg of the trading Range, the Green Box.
Al says a breakout is a search for a new trading range or something like that.
Spike 3 broke back in the prior trading Range and tested the middle of this range, the red line in the middle of these boxes.
That breakout got tested with the 2 bars in the blue box, these bars tested the middel of the trading range and the breakout point from the high of the bar before spike 3.
At the pattern from Spike 3 the channel had another breakout to the upside.
Another possibilty is if you see the 2 legs down as a Bear channel or Bull flag.
Channels are sloping trading ranges and the bars in the blue box tested the middle of the channel after the upside breakout from the bottom of the trading range.
The middle of Trading Ranges are Magnets, and a place of neutalitiy, bears are selling and bulls are buying.
Hopefully this helped you a bit, thats how i look at it.
Best regars
