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Hey guys,
I often find myself buying this type of 2 consecutive strong bull bar , thinking enough for 2nd leg. Sometimes though i feel like i am taking a bad trade. I feel like this is an ok entry but i was wondering if you guys thought otherwise and could give me some insight on when buying a strong leg 1 is not actually a good idea.
This is not a strong trade. Doji bars often make very poor candidate signal bars. The 4 consecutive bear bars are indicating that bulls buying at the high may be trapped and the 4th bear bar is actually a give up bar. Expect a 2nd leg down for bears. As you noted, this occurs at the transition breakout point where the bulls lost. This is common and reviewing many charts will help to solidify this. Note the stalling pattern at the top by bulls. Good bull bars with very poor follow through and increasing bear pressure.
Hopefully helpful and good trades to you!
Ok thanks for the answer. Now can i get you're opinion on this buy ? I wouldn't buy this area but the 2 big bull bars make me think i can at least get out BE if bad follow through , in this case i couldn't.
Similar manifestation, different chart. Context is the most important aspect and the bars are simply visual snapshots of an underlying process.
Scaling in is an advanced mechanism. When does it fail ----> strong trends. Break even is a probability aspect - - - 80% of the time. The 20% still happens.
Personally, I would be hesitant to take this buy for a couple reasons. First, the leg down was tight and fairly strong. I'd like to see some kind of double bottom or reversal pattern. Could be a sell climax, but if it is, the first target for the bulls is the last lower high. That's right where you're taking the buy. So its likely to get a pullback right there. It's also a 50% pullback of that bear leg down, which traders will sell. It's a low probability trade so that means you need at least 2:1 ratio. There's not enough room to the upside for that to be a reasonable expectation. Maybe that Leg down is a bear leg in a trading range and you're now expecting a bull leg up, but that means that highest close on the chart is the top of the trading range and sellers are waiting to sell there. That would be a 1:1 ratio if you take that buy and you don't enough probability yet for that trade to make sense.
thanks for your insights, so in what situation would you guys enter in bad context ? Or what do you judge to be enough momentum to enter in bad context ?
