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I have a question about what Al Brooks says in 16A:
He states that:
-
An Bull channel is a bear flag.
There is a 75% probability of a bear breakout, and a 25% probability of an bull acceleration breakout. -
According to the 70% rule:
After an acceleration breakout from a channel, there is a 70% probability that it will reverse within 5 bars, and a 30% probability that it will start a new market cycle.
So can I understand it this way:
-
In the 25% cases where the bull channel acceleration breakout.
70% of those fail and reverse down to test the bottom of the channel,
while 30% succeed and lead to a new market cycle.
Therefore:
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In 0.25 × 0.7 + 0.75 = 92.5% of cases, the bull channel eventually reverses downward.
-
Only in 0.25 × 0.3 = 7.5% of cases does the bull channel breakout successfully and start a new market cycle.
Is this interpretation correct?
