Breakouts (BOs) Flashcards
Does a Strong BO or a Weaker BO have deeper PBs?
a Weaker BO has deeper PBs
Exhaustion gap bars occur near the beginning or end of a trend?
It is near the end of the Trend 15,20+ Bars in
If you see a weak bull BO assume what?
PBs will be DEEP or Possible TR
Is a BO a surprise and is it a Low or High Probability event?
Yes INDEED a BO is a Surprise to Traders. And it is a Low Probability event.
We have a BO to the upside followed by a downward BO. What can happen next? What can we get on the chart?
Trend Resumption up
TRUE OR FALSE
Is every Bar on every chart either a BO, Failed BO (Reversal), or BO PB (Flag)
TRUE
In this strong BO are the BULLS or BEARs giving up?
The BULLS are giving up hoping for any kind of a PB so they can get out of their Trapped LONGS and the BEARS that are Trapped out are hoping for any kind of a PB to go SHORT.
*BEARS and BULLS are BUYing SHORT (BULLS buying SHORT out of their LONGS and BEARS BUYING SHORTS to go SHORT)
What makes this REVERSAL attempt WEAK?
Prominent Tails
Lack of consecutive BIG BULL BARS (There is a pair of consecutive BULL BARS but they’re small compared to the Big BEAR BARS)
Overlapping of the BARS
Small Bodies (Dojis)
*This is most likely a BULL leg in a TR
OR
A BEAR FLAG
Therefore I should expect at least a small second Leg down
This Weak BULL rally has no eager BULLS, why is that?
This Weak BULL Reversal has zero eager BULLS and is a result of BEARS taking partial profits to reduce their risk.
The STOP is far above soo BEARS need smaller position sizes
Are the Bulls or bears stronger? is this a breakout or failed breakout or both?
They’re both WEAK
When a BO is unclear or is equally as STRONG what is the best thing to do?
WAIT!, Wait for more Bars, wait for more information (context)
When the market is in a Tight Trading Range(TTR) what does that mean?
That the market is in BO Mode!!!!
A BEAR BO had good follow-through, what does that mean for the bears?
That the market has a high probability of at least one more leg down
Probable Measured Move (MM) down
When the market has a STRONG BO like this and then bad follow-through, when does it become neutral?
After about 10 Bars, then at that point, the market is now in BOM.
At that point, there is a 50% chance for a move up and a 50% chance for a move down
Does a FAILED BEAR BO mean it is now the Start of a BULL Trend?
No, it does NOT, though it is possible. But for the time being it means that the markets are now neutral
When there is a BO above a tight Channel is the first REVERSAL up usually Major or Minor?
The first REVERSAL up is usually Minor.
Minor reversal likely, so probable TR or bear flag, not Bull Trend just yet
Is this a Major or Minor Trend Reversal?
Major
DB
2nd Reversal in context with Stronger BULL BOO
4 BULL BARS
2 BIG BULL BARS closing on its high
What would you define this highlighted pattern as?
LL DB MTR
leading to a possible major trend reversal of the Trend
Maybe the start of a Major BULL Trend
*This is a strong enough Reversal so that maybe at least a little bit more up is likely, a possible MM
What does a Suprise Bar tell a Trader?
A surprise Bar tells a Trader that something has changed, the market has to move too a new price
Identify the Surprise Bars on this Chart
- Give-UP Suprise BAR in a BULL Trend
2nd leg sideways is likely
- BO BEAR BAR after the BEAR Give-UP Bar DT
HUGE BEAR BAR, MM down likely
3.Exhaustion Bar-BIG BO Trend Bar late in Trend
Probable EXHAUSTION
- Strong Reversal up from Exhaustion Bars; MM up likely ( Open of 1st Bar to close of the last Bar in BO)
Can a Surprise Bar(s) be a PB?
Yes SURPRISE Bar(s) can indeed be a PB in a Trend
In these MM BO where is the correct place to put my stops?
My stops will go Above the start of the Strong BEAR BO
and
Just below the start of the Reversal Up BO Trend BAR
Where are some entry SELL and BUY position entry locations could I enter the market for these MM BO Trades
What is meant by an Exhaustion Climax Trend Bar / Gap?
It is a climatical TREND BAR late in a Trend, it is the potential pause in the Trend or an End to a Trend.
It does not mean a MTR, even though there is potential for that to occur. More context is needed to identify the Reversal
The Exhaustion Climax Trend Reversal is confirmed, where would you enter to go long?
Once I see this Surprise BULL BO Bar closing above several Bars in the context is the market now in AIL or AIS? and why?
The Market is now in AIL
Why? Because it closed way above several Bars in the context and it is probably the start of a BULL Trend
Where would you place your stop on this AIL trade?
Where would you enter Long on this Surprise BULL BO?
I would look to enter LONG at a 50% PB of the Surprise BO BAR, once the PB occurs and there is a Resumption BULL Signal Bar I would place a stoop to get in at the Close of that BAR
There is a Surprise BEAR BO Trend bar that failed, where would you enter long? And why?
The Surprise BEAR BO Trend Bar did indeed Fail as the Follow-Through was extremely weak and non-existent.
A lower probability entry for this Long would be at the close of the weak follow-through Bar
OR
A Buy Stop just above the BEAR Surprise BO Trend Bar
Whenever I have a HIGH PROBABILITY trade what kind of Risk / Reward probability does that give me?
Whenever I have a High Probability Trade I am always going to have Bad Risk: Reward
With this BO above the TR what is more likely to occur?
3 Legs up or 2 Legs up?
2 Legs Up and a least a MM based on the BO of the TR
How would you describe the minimum targets on this chart?
2 Minimum targets based upon the context here is the …
- Height of the TR
- The Height of the BO above the TR
Given the big breakout what is a reasonable target?
Between 2624-2620, this is based upon the Surprise BEAR BO Bars open in 1st Bar and the CLOSE of the 2nd BEAR BO Bar
Where on this chart did the BEARS give up?
At the end of the MM, there was a Strong BULL Reversal with a DB HL MTR. The BEARs were giving up with very weak price action at the completion of the MM down
What are the two possible MM down?
MM down based upon the height of the TR
OR
MM down based upon the surprise BO Bar Open and the close of the last Bar in the BO
(Surprise BO down from TR the PB was a TR than continued down or I could see it as a PB Shallow BEAR FLAG continuation down)
How did the BULLS get trapped in the 2nd leg up here on this chart?
Look to the left. We are at the top of the range and failed to close above
On this chart, there is a BEAR Trend with a FAIL BEAR Flag were the BULLS managed to take the market above the BEAR flag. However, why did the BULL Rally above the BEAR Flag end?
The BULLS who bought were strong BULLS hoping for just a scalp and were going to be taking profits quickly.
The strong BULLs knew it was a 2nd Leg BULL Trap due to the context to the left.
At the top of the TR the BULLs saw a very sad Follow through and the BULLS gave up resulting in an end to the Rally and the BEARS are now looking to step in
Why is this a Sell Vacuum Test at Bottom of TR?
Because… Look to the LEFT, the context
That BEAR Surprise BO Trend Bar did not Break below the low of all of the Bars too the left in the TR. Making is probable that it is a 2nd Leg Trap to get traders to go short and get Trapped Short
How did this Failed Bear BO become an Exhaustion Gap Bar?
This Failed Surprise BEAR BO Trend Bar became an Exhaustion Gap due to …
- At the end of channel were the bear flag occurred (near the “1”) there was a gap between that low and the close oof the BO that subsequentially closed with the Bad follow-through DB strong Bull Bar
- The Gap between the open oof the BO Bar and the Close of the BO Bar also closed making this BEAR BO Bar an Exhaustion Gap
Strong Bear BO in TR, what should I do to ensure I do not get trapped short late in the BEAR leg in the TR?
Look to the Left and get context.
- Still, a HL so still a BULL Channel or TR
Remember, every BULL Bar or Series of BULL Bars is a BUY Climax
When the market has a series of climaxes what tends to happen?
The market tends to get EXHAUSTED
Exhausted = a break in the trend, maybe leading to a TR or sometimes even a reversal
What is meant when the biggest Bull Bar occurs late in the Trend, after 20 or more bars?
Exhaustion and most likely the end of the Trend
Odds are we are going to get a couple of legs sideways to down
Here is a chart with the Biggest BEAR Bar late in the Bear Trend.
Are we more likely too continue lower or is this an Exhaustion Gap and end of the Trend?
This is the biggest BEAR bar in the last 60-70+ Bars in this Bear Trend.
It is more likely that this is and Exhaustion Gap and the end of the Trend
Note: Also after this Exhaustion Climax BEAR Bar the follow-through was weak. Gaps to the upside were closed and this confirms the end of the BEAR Trend opposed to another MM down
On the chart, the Biggest BEAR Bar of the last 60-70 Bars occurred late in the Trend making it an Exhaustion Gap Bar.
We still got one more leg down, why is that?
We often get one more leg down, one more sell climax before a reversal up simply because the Trend was very strong.
Look at the context, the Bear Trend was going on for quite some time
This was a very tight BEAR channel, these reversals at the Base would you call them Major Reversals or Minor Reversals?
Minor Reversals
What do these minor trend reversals lead to?
They lead to a HL MTR after the strong minor reversals up
These are give-up Bars, why would the Bulls step back in to take the price higher?
The BULLS would step back in to take the market higher because they see the BEARs do not have enough strength to take the market higher and the market is going sideways. Making the probability 50/50 for a Trend Resumption versus a Trend Reversal
In this TR, identify the 2nd - Leg Trap
2 (the second highlighted bar is the 2nd leg up trap)
Trap traders into buying high, and selling low
*Experts BLSHS
In a BULL FLAG what percentage of the time is there a BEAR BO?
40% of the time there will be a BEAR BO to the downside in a BULL FLAG
Does this surprise BEAR BO have good or bad follow-through?
Bad Follow-Through
-Sometimes the follow-through does not come until 2-3 Bars Later
On a surprise BEAR BO who gets trapped?
Whenever there is a surprise move, BULLS & BEARS Both get TRAPPED (BULLS TRAPPED IN/BEARS TRAPPED OUT)
What do TRs constantly TRAP Traders into doing?
TRs constantly TRAP Traders into SELLING LOW and BUYING HIGH
*When in a TR and a 2nd LEG UP/DOWN Strong BO occurs, pay attention to the FOLLOW - THROUGH
- If weak look to do the opposite of the BO as Traders will get trapped thinking it is a BO and get trapped
- When they REVERSE UP at bottom of TR; I usually will get a pretty good looking BUY Signal BAR
- When they REVERSE DOWN at the TOP of TR; I usually will get a pretty good looking SELL Signal BAR
- Very often a MICRO DB/DT
- They will be handing their money to my account
When the market is in cycle of a TR when there is a 2nd Leg UP and it is a Strong Surprise BO what must I be prepared for?
That it may be a 2nd LEG UP TRAP (Failed BO Attempt in a TR) and be prepared for the market to REVERSE
*If I see after the BO TREND 2nd Leg UP, a BEAR bar forming and closing on its low; chances are we will get a couple legs down
Identify the failed bear BO
Bottom of BEAR FLAG turned TR after 10-20+ Bars
Price failed to Break the Support 10+ times
Failed BEAR BO did not succeed it Reversed
now the BO to the BULLS is successful
Are these Failed Bull BOs PBs or Reversals?
These Failed Bull BOs are PBs
- When the Follow-Through Bar after the failed BULL BOs went below their previous bar it created the Failed BULL BO
- PB, then Trend Resumption
Do you think this is going to be a BEAR REVERSAL or a BULL FLAG PB Trend Resumption? and why?
A BULL FLAG PB Trend Resumption…
because look at the BULL BO Trend Bars
- Closing near their highs and above their midpoints
- The Open of the new Bar is above the close of the previous Bar Close
- It is the 1st PB after a Strong BO
- Therefore there is a HIGH Probability of a 2nd Leg-up
- Even a possible MM up based upon the open of the 1st Bar of the BO to the close of the final Strong Bar in the BO
Which is more likely at this wedge top, Reversal or BO?
At the top of (3 touches) with a good Sell Signal Bar a Reversal is more likely
- Its at the end of the 2nd leg up
- Entry Bar after Signal Bar is a setup with a favorable Traders Equation
A strong BULL BO with PB as such what reasons should I buy for?
Buy for any reason
- At market
- Close of bull, or bear bars
- Above, or below the prior bar
- BO of bull flag (buy PB)
With the BEARS selling for any Reason due to the Strong BO below the previous 10+ Bars Describe the labeled Entry highlighted positions on this chart
- Traders are selling at the close of BEAR/BULL Bars betting that we will go lower
- Whenever a BULL closes near its HIGH they will SELL also betting the BULL will be a FAILED REVERSAL becoming a BEAR Flag for a Trend Resumption down
- (In this BEAR Flag, there are 3 BULL Bars but they’re not very big nor convincing)
- The BEARS will Sell the BULL Closes betting it is a minor reversal
Describe the price action on this chart image
BEARs Bet on BO of the BEAR FLAG and for a BEAR Trend Resumption
BEAR FLAG = BULL Channel / Bull Leg in BEAR Trend
- Breaking Below the Channel the BEARs Bet again of the BEAR Trend Resumption
Where should you buy on the BULL FLAG PB?
*Be ready for BULL FLAG, to break out to the upside
- Buy on stop at just above high of prior bar
Why would you sell for any reason in this BEAR BO?
At this point you must SELL as BULLS are TRAPPED they have to get out FAST; it is because the market has fallen below the BULL BO and previous 7-10 BARS
- BULLS have decided they’re on the wrong side of the market
- BEARS also see this assume maybe we are going for a MM down based on the height in the BULL BO in the recent context and they know we are going lower
*A lot of Traders if they quickly understand what is going on they will HIT the Button … SELL @ the MARKET
Why is this BULL Rally in this BEAR BO weak?
Look at the context, very Big BEAR Trend BO Bars. The BULL Bars do not have any conviction in Reversing the price.
The Bull Bars are small, have prominent wicks, bad follow-through.
* Minor Reversal + Weak Rally (in BEAR BO) = Probable Bear Flag; worst case scenario it would be a TR
(If a Rally looks WEAK I must assume it is a Bear Flag and be prepared to Short.)
Why is this a Measuring Gap and not an Exhaustion Gap?
It is a Measuring Gap
- Broke below the past 7-10 bars
- BIG BO Trend Bar closing Near its LOW
- 3rd Consecutive BEAR BAR and its STRONG (volume increasing)
Explain what you see on this chart
BIG TREND BAR Late in Trend
- More chance of climax and possible Reversal
*Exhaustion GAP = means the BULLS are tired (in BULL TREND) or the BEARS are tired (in BEAR TREND)
Exhaustion GAP does not necessarily mean Reversal just the BULLS/BEARS are exhausted and need a break.
Could it lead to a reversal?
Yes if after the Exhaustion TREND BAR (in. BULL Trend) we start to see STRONG BEAR BARS closing consecutive near their lows than a BO BEAR bar below previous 7-10 Bars; chances are we are getting a REVERSAL and going lower
Is this BIG BULL BAR more likely the start of a NEW LEG up or an Exhaustion GAP?
Exhaustion Gap is more likely
- Big Bar Late in Trend, after 20 or more bars
- Big BULL Climax exhaustion gap bar followed by a BIG BEAR Bar closing on its low making the odds high (60% or more) that will we fall lower and close the gap with the prior high of the BARS to the left prior to the Exhaustive BAR
When a surprise Bar is Exceptionally Big where should the Stop be put and what does it mean?
The stop should be put below the Surprise Bar
and it means BIG Risk = Big Reward
*Potentially look to Buy 50% PB potentially
What makes this 2nd leg up a BULL Trap?
Look to the left, we are still in the TR
- The Biggest BULL Bar (In Green) is in the biggest of the past 15-20 bars and it did not break above the previous high
- We are still in a TR due to this and it is likely an exhaustive Gap Bar and we are going lower.
Bull BO of Bear Flag is a Surprise
- Traders expected opposite
- Traders are Trapped in and out
- Surprise Bar from a Bear Trend Bear Flag is a low probability event
When would a Long trade be a good trade?
Many Bulls will not buy until after the BO above the LH
- The Bulls need 1-2 more follow-through Bars to confirm Bull BO above the Major LH (Resistance)
The good trade will be after there is a Break above the major LH.
- The start of the Bull BO (below LH) and the Follow - Through (Break above the Major LH) - 2 strong bull Bars
- ENTRY AFTER BUL BAR BREAK ABOVE MAJOR LH
Successful BOs usually have a 2nd leg
When do the Bulls start buying?
Upon the successful BO of the BEAR Flag above the previous LH (Resistance)
- BEARs are trapped in and the BULLs are trapped out
- BEARs are waiting for any kind of PB to exit with a loss and the BULLS want a PB to enter long as this strong BO above the LH has a 60% chance of a 2nd leg up
- The Bulls start to buy the PB as the BEARs have no convincing bars to reverse price (2nd LEg up probable)
What is the minimum goal after a strong BO?
The minimum goal after a strong BO is a 2nd LEG UP possibly a MM
Can more BOs in the Trend lead more LEGS UP?
Yes, if a 2nd Leg is strong it often leads to another LEG
Are 2nd Legs always clear?
No, sometimes more bars are needed to know id 2nd leg is complete
a Strong BO has a 60% chance of what and a 40% chance of what?
a Strong BO has a 60% chance of at least a 2nd Leg Down/UP
and
a 40% chance of a Reversal
In a Bear Trend, what do Bears see rallies as?
Bears see all rallies as bear flags and Sell Reversals down
When the market is in a TR what percentage of the time do BOs fail?
80% of the time BOs in TRs Fail
BLSHS
In a TR who bets against who?
Bears bet against the Bulls until a confirmed BO for the Bulls
and the
Bulls bet against the Bears until a confirmed BO for the Bears
This results in Trend Reversal or a Trend Resumption
What increases the odds of the market continuing to the downside after this BEAR BO Trend Bar leading to another Leg down?
- The more price closes near its low in the BO Trend Bar instead of having big tail on the bottom
- The more it closes below the low of the Bars in the context
- The bigger the Bar is the more likely the Bears will follow-through selling
- Closing below the previous 50-60 Bars
Can a 2nd leg be as small as one bar?
Yes it can as shown in the chart below
Early in a Bear BO are Bulls still scaling in betting on a failed Bear BO?
Yes, they’re betting the BO will fail because 80% of BO fail.
However, remember after 20-30+ bars the TR does become neutral and has a 50/50 probability to break in either direction
- Once the Bulls see some Bear Follow-Through, they sell out of the long bets and wait for many bars to look to buy again
What is this 1 Bull Bar PB in this series of Bear Bars and 1 doji in the Bear BO?
This Bull Bar is a result of Bears taking off some risk, taking some partial profits to reduce their position size
In this Bear BO from the TR the Bulls want a higher PB to exit with a smaller loss.
What must a Bear see to ensure Trend Resumption?
Some kind of pattern to illustrate Trend Resumption.
Here is a Bear Flag Micro DT
- Bears sell knowing bulls will exit and not buy for many bars, this creates a 2nd leg down.
Early in BO Bears scale into a short betting on the Failed BO attempt.
When do the Bears Buyback their Shorts?
Once the Bears see strong follow-through, they buy back shorts and wait for many bars before looking to sell again
With the stop far below there is a great risk.
In this Bull BO what creates the PB?
The PB is caused buy Bulls taking partial profits and the Bears buying back their shorts for a loss.
- Though the profit-taking creates the PB in the market, it is still AIL and it is still a BULL FLAG
If the BO does not soon fail will the Bull Trend resume up?
Yes if the BO does not fail we will get a trend resumption up. Bulls give Bears about 10 bars, to see if bears can cause the BO to fail and if not begin to buy Longs
Note: If this PB starts to grow to 20-30 Bars we are back in another TR and have a 50/50 Probability with a break to either side
With this Bear BO what will increase the probability odds of a profit for bears?
Traders like to see confirmation after a BO
Bear follow-through increases the probability of a profit for the bears and the price going lower
Does a BO usually need a 2nd Bar to confirm?
Yes, they usually do, when follow-through bar is a reversal the probability of the BO is low
Note: Every Trend Bar is a BO Bar; BO attempt
This Bull BO had bad follow-through, what needs to happen for the price to reverse?
A follow-through Bear Bar
NOTE: The Bull Trend had 2 legs Ten Bars up
Bears will sell strong bull closes at MA betting on no follow-through buying and that the reversal will fail.
Why?
Markets have inertia, look at the context we are in a Bear Trend, and Reversals fail 80% of the time. The Bulls need at least one more follow-through Bar to confirm the reversal
What do these reversals become in this Bear Trend?
These Reversals become PBs, Bear Flags
Failed Reversal in Bull Trend Becomes Bull Flag.
Where will Bulls buy Bear closes on this chart betting the reversal will fail?
The Bulls will buy Bear closes at the MA betting on the failed Bear Reversal attempt
In a Bull Trend when the price is reversing,
Bears see Reversal
&
Bulls see _________?
Bull Flag
Can a big trend begin with a small trend bar?
Yes, it can
- Single, unremarkable trend bat
- Large trend bar
- Series of big or small trend bars
Is a Reversal a BO?
Yes, it is a BO
- All trends are in channels
- All Reversals are BOs
- Reversal breaks out of channel
Follow - Through Bars are caused by both
- The Follow - Through is give - up Bars caused by Bears giving up, and Bulls aggressively buying
- Scale in Bears and Wide Stop Bears now trapped
- Both Bulls and Bears believe the probability of higher prices is 60% or more
Follow - Through Bars are caused by both
- The Follow - Through is give - up Bars caused by Bears giving up, and Bulls aggressively buying
- Scale in Bears and Wide Stop Bears now trapped
- Both Bulls and Bears believe the probability of higher prices is 60% or more
Do strong BOs usually lead to Trends?
Yes, Strong BOs do usually lead to Trends
- On this BO, the Bulls got more follow-through
- Often with a strong follow-through like this a 2nd Leg is highly likely
- Reward is high
What are some disadvantages of a BO?
- Have to reduce position size
- Stop is far, so risk is big
- Difficult emotionally
How are BOs difficult Emotionally?
- Scary and stressful
- Change decisions with every tick
- Not enough time to decide
Is a BO one or more Trend Bars or Both?
Both, a BO can be one or several Bars
What kind of BO is this?
a BO above MA
Always look for TLs, what kind of BO is this?
BO above TL
Can a failed BULL BO become a Bull Flag?
Yes, a failed Bull BO can become a Bull Flag (it is also a PB)
- Reversal down is a Bear BO but it is weaker than the BULL BO
- Traders buy the weak sell signal (Bull Flag) betting it is a 50% PB to a 2nd Leg UP
Can a BO be one trend bar?
Yes, Strong trend, trend bar or bars, BO, spike, climax, gap, reversal
(All are trend bars)
- The choice of term to describe the type of BO bar depends on the context (bars to the left)
Can a BO be several Trend Bars?
Yes, Strong trend, trend bar or bars, BO, spike, climax, gap, reversal
(All are trend bars)
- The choice of the term to describe the type of BO bar depends on the context (bars to the left)
Can a BO eventually be a PB or Reversal attempt?
Yes, Strong trend, trend bar or bars, BO, spike, climax, gap, reversal
(All are trend bars)
- The choice of the term to describe the type of BO bar depends on the context (bars to the left)
Is a Reversal a BO?
Yes a Reversal is also a BO
Strong trend, trend bar or bars, BO, spike, climax, gap, reversal
(All are trend bars)
- The choice of the term to describe the type of BO bar depends on the context (bars to the left)
How should I trade a TR?
- BLSHS
- Fade Strong Trend Bars
in a TR should the Trader enter on Short Reversals near the top third of the TR and/or Long Reversals near the bottom third of the TR?
Yes, the Trader most definitely should in a TR
Should a Trader Buy strong Bear Closes and Reversals up near the Bottom of a TR?
Yes, in the bottom third of the TR Traders should most definitely be buying Strong Bear closes and Reverses up
