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THREE SET UPS


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THREE SET UPS

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  #381 (permalink)
 
Jeff Castille's Avatar
 Jeff Castille 
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Fat Tails View Post
I traded an inside bar today, however I did not take the breakout, but faded it. Here are the details.

On the YM 5 min chart the trend of the market was up, when an inside bar occured at 8:50 PM CET (2:50 PM ET). The inside bar also was a narrow range 7 bar, which means that it had the lowest range of the last seven bars.

There were three reasons, why I did not follow the bears to trade the breakout but faded it.

Trendline

The market was still in an uptrend, as the trendline had not been broken.

Support/Resistance

The inside bar was just sitting on a fibonacci confluence line. This line had already been confirmed earlier during the day, as it also became the low of the opening range (initial balance 1 hour). So the inside bar was clearly above support.

Climax and Churn Volume

The better volume indicator showed a climax bar (light blue) followed by a churn bar(yellow). This is exhaustion volume followed by stopping volume and often leads to a reversal. Note: This rule applies on balancing dayss only, not on trending days!

Summary

The trend on the chart was up. Prices retraced to a strong support line. When approaching the support line, a climax bar formed followed by a churn bar, which was an inside bar. It was very likely that the bearish breakout would fail and trap some bears. The pattern was also a bullish Harami, but I am not using those candlestick patterns.

So I entered when prices moved back to the fibonacci line. The trade was also confirmed by my 15 min chart. First half of the position exited at the floor pivot S1. Second half stopped out when price retraced back to floor pivot S1 should have given more wiggle room.

The inside bar is similar to John Carter's squeeze. You will likely see a breakout if you expect volatility to increase, but you have to use additional tools to determine the likely direction of that breakout.

Hey Fat Tails,

Thanks for the thoughtful post. I was wondering how you would employ these guidelines to a 15 minute chart of CL?

Thanks, Jeff

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  #382 (permalink)
 
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 Fat Tails 
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Hi Jeff,

there are some differences. The better volume indicator cannot be applied to a 15 min chart during the first 4 hours of the RTH session, so it is pretty useless.

The CL 08-10 15 min chart shows two inside bars. Both occured outside the Keltner Channels (33,3), so you may assume that the market is overextended to the downside and that the bears are already tired. This would be a potential long setup in any case. I have learned this from the ElectronicLocal blog. Either you trade inside out or outside in (referring to Keltner Channels), I do not take any trades outside out, because this is the greater fool approach.

So the setup consists of an expansion bar, followed by an inside bar. The expansion bar should have high volume to allow for exhaustion of bulls or bears, and ideally the inside bar would be a churn bar. In a strong trend you do not take the reversal directly, but there are two options:

(1) Trend exhaustion/churning often characterizes the end of the 3rd wave, it is the start of accumulation (or distribution). The 5th wave is yet to come and often presents itself as a false breakout above or below the high or the low of the third wave. You could then use a fib extension or a pivot to fade that final flag (as Al Brooks calls it). The final flag should have lower volume than the prior exhaustion move, otherwise it is no final flag.

(2) Wait for a trendline break and a second entry and enter 3 or 4 ticks above the upclose that follows the test of the high or low.

For the two marked inside bars on the chart, second entries would have worked in both cases. I would not have taken any short setups, because of the greater fool problem.

If the inside bar occurs inside the Keltner Channel, I would favour a with-trend setup.


Jeff Castille View Post
Hey Fat Tails,

Thanks for the thoughtful post. I was wondering how you would employ these guidelines to a 15 minute chart of CL?

Thanks, Jeff


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  #383 (permalink)
 
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 Silvester17 
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lots of opportunities today.

missed to mark an outside bar around 12:30. but didn't qualify because of low volume. and at 11:05 was a bullish reversal bar, but no trigger.

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  #384 (permalink)
 
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 Jeff Castille 
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Silvester17 View Post
lots of opportunities today.

missed to mark an outside bar around 12:30. but didn't qualify because of low volume. and at 11:05 was a bullish reversal bar, but no trigger.

Hey Silvester,

How about the inside bar at 10:55 on your chart........any reason you didn't comment on that one?

Thanks, Jeff

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  #385 (permalink)
 KJAVED 
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Silvester17 View Post
lots of opportunities today.

missed to mark an outside bar around 12:30. but didn't qualify because of low volume. and at 11:05 was a bullish reversal bar, but no trigger.


If we use some other tool with volume then winning can be increased. All reversal and Inside bars appears at some support or resistance levels. Just to add trend lines, prefrably Gann fans better, as privide also clues where the market is going at open, from last two swings footprints.

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  #386 (permalink)
 
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 Silvester17 
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Jeff Castille View Post
Hey Silvester,

How about the inside bar at 10:55 on your chart........any reason you didn't comment on that one?

Thanks, Jeff

another one I missed. getting old. met all the criteria and a nice winner.

good eye, jeff.

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  #387 (permalink)
 
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 Silvester17 
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KJAVED View Post
If we use some other tool with volume then winning can be increased. All reversal and Inside bars appears at some support or resistance levels. Just to add trend lines, prefrably Gann fans better, as privide also clues where the market is going at open, from last two swings footprints.

hi kjaved,

absolutely. many times those trend reversal bars take place at support or resistance levels. and I really like those gann fans very much, but I'm not very good at using them.

anyway great idea.

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  #388 (permalink)
 
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 Jeff Castille 
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Hey KJVED,

I'm with Silvester...........I really don't know much about the Gann Fan.......perhaps you could take a moment and briefly describe how you use these in real time.

Thanks, Jeff

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  #389 (permalink)
 
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 lolu 
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My first HIT @ London Open just now; and on an INSIDE BAR.

Lolu

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  #390 (permalink)
 
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 lolu 
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KJAVED View Post
If we use some other tool with volume then winning can be increased. All reversal and Inside bars appears at some support or resistance levels. Just to add trend lines, prefrably Gann fans better, as privide also clues where the market is going at open, from last two swings footprints.

For volume, I use the GOMVolumeLadder (tweaked to my style). For support/restance I use simply EMA20. In any case, if I want to use the GANN FAN, what determines the POINTS OF BAR setting ? The default setting is 0.00010.

Lolu

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