Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader

Preface xiii

CHAPTER 1 Price Action 1

Trend Bars and Doji Bars 7

Bar Basics: Signal Bars, Entry Bars, Setups, and Candle Patterns 11

Signal Bars: Reversal Bars 13

Signal Bars: Other Types 17

Outside Bars 36

The Importance of the Close of the Bar 42

Exchange Traded Funds (ETFs) and Inverse Charts 45

Second Entries 46

Late and Missed Entries 49

CHAPTER 2 Trendlines and Trend Channels 51

Trendlines 51

Micro Trendlines: Small, Steep Trendlines in Strong Trends 55

Horizontal Lines: Swing Points and Other Key Price Levels 61

Trend Channel Lines 63

Dueling Lines: Intersecting Trendline and Trend Channel Line 68

CHAPTER 3 Trends 71

Two Legs 75

Signs of Strength 76

Common Trend Patterns 81

Trend from the Open 82

Reversal Day 86

Trend Resumption Day 86

Trending Trading Range Days 88

Tight Channels and Spike and Channel Bull or Bear 91

Stairs: Broad Channel Trend 95

CHAPTER 4 Pullbacks 99

First Pullback Sequence: Bar, Minor Trendline, EMA, EMA Gap, Major Trendline 101

Double Top Bear Flags and Double Bottom Bull Flags 104

EMA and Gap EMA Pullbacks 108

2 HM: If Away from EMA for Two or More Hours, Then Fade EMA and First EMA Gap Bar 110

Trend Day 11:30 Stop Run Pullback to Trap You Out 112

Counting the Legs of a Trend 114

High/Low 1, 2, 3, and 4 118

Variations of High/Low 2 Setups 128

Three Push Pullbacks 132

CHAPTER 5 Trading Ranges 137

Tight Trading Ranges 138

Barb Wire 142

Middle of the Day, Middle of the Range 148

Big Up, Big Down 150

Trading Ranges Setting Up Trend Reversals 152

CHAPTER 6 Breakouts 155

Breakout Entries in Strong Trend 156

Breakout Pullbacks and Breakout Tests 158

CHAPTER 7 Magnets 165

Measured Moves Based on the First Pullback (AB = CD) 165

Measured Moves on Breakouts Based on Thin Areas and on Flags 167

Reversals Often End at Signal Bars from Prior Failed Reversals 171

Other Price Magnets 172

CHAPTER 8 Trend Reversals 175

Trendline Break 184

Trend Channel Line Failed Breakouts: Climaxes, Parabolas, and V Tops and Bottoms 187

Signs of Strength in the First Leg of a Reversal 188

Trends Reverse with a Test: Either an Undershoot or an Overshoot 190

Double Top and Bottom Pullbacks 202

Climax: Spike and Trading Range Reversals 207

Climax: Three Pushes and Wedges (Trend Channel Line Overshoots and Reversals) 210

Expanding Triangles 215

CHAPTER 9 Minor Reversals: Failures 221

Failed Signal and Entry Bars and One-Tick Failed Breakouts 222

Failed High/Low 2 226

Failed Higher High and Lower Low Breakouts 229

Failed Trendlines and Trend Channel Lines 234

Failed Reversals 239

Failed Final Flags: Tight Trading Range 243

Failed Final Flags: Huge Trend Bar 245

Failed Wedges 247

Failed Scalps: Five-Tick Failed Breakouts and Failure to Reach a Scalper’s Profit Target 251

CHAPTER 10 Day Trading 255

Selecting a Market 256

Time Frames and Chart Types 258

Globex, Pre-Market, Post-Market, and Overnight Market 267

Scalping, Swinging, Trading, and Investing 269

Always in the Market 273

Have at Least Two Reasons to Enter a Trade 275

Entering on Stops 277

Protective Stops and Getting Trapped In or Out of a Trade 281

CHAPTER 11 The First Hour 289

Patterns Related to the Premarket 291

Patterns Related to Yesterday 292

Trend Bar on Gap Open: First or Second Bar 302

Gap Openings: Reversals and Continuations 303

Trend from the Open or Trend from the First Bar 305

Third Bar of the Day and the 15-Minute Close 310

Strong Trend Bars in the First Hour Often Predict Strength Later in the Day in the Same Direction 311

Opening Patterns and Reversals 313

Double Bottom and Double Top Flags 317

Trading Range Breakouts 319

First Pullback 321

CHAPTER 12 Detailed Day Trading Examples 325

CHAPTER 13 Daily, Weekly, and Monthly Charts 331

Huge Volume Reversals 343

CHAPTER 14 Options 347

CHAPTER 15 Best Trades 353

Major Reversals 357

Minor Reversal Scalps during Trading Range Days 368

Pullbacks in a Strong Trend 369

Intraday Stocks 374

Trading Guidelines 381

Glossary 387

About the Author 395

Index 397