5. Levels and Cycles

Question 1

How do you determine the peak of the level 1 end (tail of the ‘W’) ?

Answer 1

Determine where price is after it moves back to the 50 EMA?

Question 2

How do you identify that the level 2 has started after price moves away from the 50 EMA?

Answer 2

Notable volume comes in and price moves up, takes out the previous level, confirms level 1, now we are working on level 2

Question 3

The longer the consolidation the better, when does this apply?

Answer 3

After the first leg up (or down) from a peak formation

Question 4

If the next leg up breaks the zone but then pulls back in the zone and consolidates, what does that mean for the pattern?

Answer 4

The breakout was invalid and you are still in the original zone (this case, level 1)

Question 5

Peak formations can also be in the form of..

Answer 5

head and shoulders

Question 6

What happens when price moves beyond the previous level’s high?

Answer 6

It has taken out that previous zone and is getting ready for consolidation somewhere else

Question 7

What is the only way a level can be invalidated?

Answer 7

Is if the previous high is taken out by the proceeding level - in other words if the pullback from the subsequent zone moves it back into the zone that was thought to be complete