Another nice piece of TA today. Calling the bull triangle breakout and predicting a target of 8080. Sopt on. So what was missing from a perfeect piece of TA? A pullback to the down trend resistance line. However there was a tiny pullback of 5 points..... Next up was looking out for the target.The rule is stay in above the 100MA UNLESS you see a top. We can see( unusually) 3 minor head and shoulders which should have got us watching closely for a failure, confirming a top. We didn't get any performing until the third one....confirmation being, as always, a break into the 100MA. So now we see a 3 peak ND top forming. The out can be on the second top and that's divergent and as close as you want to the 808 target. No point in getting greedy.
Waiting would have put you in a dilema as the price hit the 100MA and it looked like the third H&S was going to deliver. Both CCI and RSI formed negative slopes confirming the divergence.
Having got out around 8080, you should have seen the confirmed 3 pk ND top and started looking for the confirmation of a short entry as the price fell through 100MA.That came between 8060 and 8070, with two tiny pullbacks for confirmation. Calling the bottom at 8K had to be a quick decision, in the absence of any real clues although if you had been watching the ES volume, the clues were there.
Playing the breakouts and tops can be very rewarding, with minimal risk.Entering on the tiny pullback at 8010 give a reward to risk of 8:1, the risk being the drop through theresistance line at 8000, the reward being 8080. A lot has been talked about Reward/Risk Ratio in other parts of the BB and this is a good example.Ideal for the Spread Betters. From a personal point of view, these breakouts are so predictable in their price action they are an absolute dream to trade. The risk and fear diminishes to zero...... Like every thing in life, if you practice enough times, you become an expert.... You get to know when a trade is "minimum risk" and when it's a pure gamble. Staying out of those gambles is a hard lesson to learn. I said yesterday that the expanding triangle was a sign of high volatility and that's what we got at the open. If you get that wrong, you just get whipsawed in and out and just as you think you got it wrong and reverse the trade, the thing turns round. Do the 2 or 3 times in a row and you're looking at 100+ points down the pan.
One final thing that's not mentioned naywhere( as far as I know)... The bull triangle... how could I be sure it would break to the upside? Well, you never can be totally sure. BUT look at the action above and below the 100MA during the formation. Look at the area above and below the curve (100MA). Clearly there is more price action above the 100MA than below. I refer to this as the "balance of power being above the 100MA". This gives weight to the probability of a breakout to the upside.
