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your rule makes sense, as it is a trend filter. Trend continuation usually has a higher probability compared to a reversal. But would you really take a long above EMA after
- price has penetrated the upper limit of the Keltner Channel,
- a buying climax has occured followed by some stopping volume (churning),
- price is just sitting below resistance?
This looks like a Greater Fool Trade, and who is the fool you will be selling to?
What I've noticed is that if the trend is extended and you get an inside bar and price wants to mean-revert it will probably not give you a head-fake signal that the trend is going to continue, rather, that it will truly reverse without giving you a continuation signal and you won't enter a trade if you are only trading with-trend. Of course, this is not always the case, but more often than not that's the way it happens, at least in my cursory, non-backtested observations.
I have also seen a lot of inside bars at that occasion that lead to a false break-out. It would typically look like this (example for a reversal of a bullish move)
- expansion bar (climax)
- churn bar closes within the range established by the expansion bar
- inside bar
- final flag -> false breakout to a new high, reverses at resistance
- move back into the trading range
- then breakout to the downside
What I want to say is, that the breakout in direction of the trend is not always a high probability trade if the market is already overextended. I would prefer to wait that price moves back into the channel, before trading in direction of the trend.