While price bounces within a narrow range consolidation, it's bound to break out sooner or later, and today provided some examples of why a higher probability trade results from waiting out the move for a pullback.
Here was an example in POT where price had been bouncing around in a congestion range since the previous afternoon. Notice the opening drive through the bottom of the range resulted in a snap-back to the top of its range (example in waiting for a pullback). While later in the day the breakdown pullback was easier to gauge.Here's what I was looking at on a faster chart with entry/exit arrows:Later in the day POT provided an example of why not to get too eager jumping into a breach of support/range. I later missed a decent entry:
RIMM broke down from a symmetrical triangle (a form of narrow range consolidation) and pulled back before extending lower. I actually exited half at the PDL (red dotted line) before exiting the remainder at the green up arrow.FCX; I didn't actually trade the first breakdown from consolidation, but the break-out later in the day provided a good opportunity. This highlights the concept of avoiding buying a breakout/breakdown as it's happening. If you're not in it before it breaks out, it's best to wait for a pullback before entering. In this case one might have bought the initial breakout and may have been stopped out on a return back to the congestion range. A realistic target in today's market (mixed/neutral internals) was within that PDC, PDH, or Open price range (blue dotted line, green dotted line, yellow dotted line respectively).
And finally, another one I missed today (thinking it might pull back more) was a symmetrical triangle in IWM:
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
I am always open to questions, comments, or suggestions on how to improve this blog.