Bonus 7: Trading when Market is in a Bull Channel

Question 1

What is a Bull Channel?

Answer 1

Series of mostly Higher Highs and Lows
Pullbacks can be Big or Small
Bull Trend begins with a Breakout (BO), which can be big or small.
Represents bears giving up and bulls buying aggressively.
Every trend bar is a BO and every BO is a trend bar

Question 2

A Pullback (PB) in a bull trend is a bar with a Low (L) below the Low (L) of the prior bar

Answer 2

Once a breakout (BO) has a Pullback (PB) and a bar with a bear body, the Breakout has ended a channel has begun

Question 3

A Bull Channel is a Bull Trend and easiest way to make money _________, especially if most bars are mostly above EMA.

Answer 3

Buying

Question 4

Signs that is is better to only look to buy:

Answer 4

Look for consecutive bull bars above the moving average.
Most of the pullbacks don’t get far below the EMA
Pullbacks stay above most recent Low
(Stop order bears are losing money)

Question 5

The Spike and Channel Bull Trend often comes back to where the channel originated.

Answer 5

Bull Channel acts like a Bear Flag

Question 6

Very often, Bull Channels will reverse after the 3rd Leg Up. Al sees this as a wedge.

Answer 6

When the 3rd leg is extreme like the photo, it will attract some profit taking

Question 7

Anytime the market breaks above the line of a wedge, 50/50 chance you’ll get a stronger leg up, or breakout will fail and you’ll get a reversal down.

Answer 7

Question 8

What are the 4 types of Bull Channels?

Answer 8

Bull Channel
Tight Bull Channel - small pullback bull trend
Bull Micro Channel
Broad Bull Channel

Question 9

When you see higher lows in a Bull Channel, the aggressive bull will assume bear attempts at reversal will fail and will buy pullbacks to around EMA and middle of last bull leg

Answer 9

Question 10

A Channel is a stairs pattern. Every time you get a new high, expect a pullback.

Answer 10

Bears will sell the new highs.

Question 11

Small Pullback Bull Trend

Answer 11

Doesn’t look strong because of small bodies and prominent tails. But if you look on a higher time frame, they are strong bull bars.
Here’s a small pullback bear trend from yesterday

Question 12

Small Pullback Bull Trend
In this example, started as weak rally looking like a Bull Leg in a Trading range
Most Pullback last only 1-2 bars and do not fall far (small pullbacks)
No consecutive closes below EMA

Answer 12

We’re getting sideways moves and not pullbacks. And every low is at or above the low of the prior bar.
We went 25 bars without a pullback, so extreme buying
Pullbacks did not go below previous high.
He talks about Body gaps here and I need to study that section again.
Anytime you look at a chart and say “the bears cannot make money,” you have to buy.
Higher time frame inserted.
When impossible to make money selling, even with limit orders, Only look to buy, even below bear bars. Bet against reversals.

Question 13

Another great photo of trading a Small Pullback Bull Trend

Answer 13

Question 14

Trade a Broad Bull Channel like a Trading Range

Answer 14

Question 15

When you have trading range price action, the reversals often are not clear.
When not confident, a trader should wait for a ______________

Answer 15

2nd Signal
Because when buying near bottom or selling near top, you’re never sure if that’s the top or bottom.
Better to wait for a second signal
If traders see a market like this, they should take very few trades.