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Al Brooks Price Action Fundamentals SmithJones > Wedges > Flashcards

Wedges Flashcards

1
Q

Sometimes a Wedge contains 4 or 5 points and the premise of the wedges still holds true.

A

Sometimes a Wedge contains 4 or 5 points and the premise of the wedges still holds true.

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2
Q

How should a trader think of a Wedge?

A

a Trader should think of a wedge as either a Flag or MTR

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3
Q

a Wedge is ultimately a triangle that is either sloped upwards or downwards

A

a Wedge is ultimately a triangle that is either sloped upwards or downwards

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4
Q

What is a potential Rising Wedge?

A

It is a potential Top; odds are high the market will get a Bear BO

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5
Q

Is a Wedge Top a Climax?

A

Yes it is, it shares properties with All Climaxes

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6
Q

a Small PB Bull Trend is a FOMO trend; Bulls buy because of momentum, rather than fundamentals.(highlighted in Blue)

A

a Small PB Bull Trend is a FOMO trend; Bulls buy because of momentum, rather than fundamentals.(highlighted in Blue)

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7
Q

FOMO Trends/Trades are CROWDED Trades once the momentum ends the Bulls are quick to get out and give up

A

FOMO Trends/Trades are CROWDED Trades once the momentum ends the Bulls are quick to get out and give up

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8
Q

Can Wedge Bottom Reversals factors increase the Reliability?

A

Yes, the factors in a wedge bottom reversal can increase the reliability. Look at the chart below to see this in action

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9
Q

What is the goal(s) of the wedge reversal?

A

TBTL (it could be more or less; but this is the standard goal) or a Test of the Top of the Channel or a Test of the Top of a TR from the bottom third

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10
Q

What is the goal of every market?

A

The goal of the market is to find a fair price. It is constantly probing up and down until clearly it is too far, then it reverses and probes/ in the opposite direction

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11
Q

The Bears decided this market is to low to sell and will only sell higher, Bulls believe market fell to low and they now BUY

A

The Bears decided this market is to low to sell and will only sell higher, Bulls believe market fell to low and they now BUY

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12
Q

Wedge Bottom is Climatic, they share properties with all Climaxes

A

Wedge Bottom is Climatic, they share properties with all Climaxes

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13
Q

Remember a Wedge is a Triangle that is Sloped Up or Down. Three strong pushes with reversals in a type of Channel. It is more reliable if the lines are converging but it is not necessary.

A

Remember a Wedge is a Triangle that is Sloped Up or Down. Three strong pushes with reversals in a type of Channel. It is more reliable if the lines are converging but it is not necessary.

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14
Q

Whenever I have a wedge what are the odds of a BO in the opposite direction?

A

There is a 75% pf a Break to the opposite direction

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15
Q

Wedges are Triangles - 50% Chance of a BO into either direction after 20+ Bars

A

Wedges are Triangles - 50% Chance of a BO into either direction after 20+ Bars

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16
Q

Wedges are common; however perfect looking wedges are RARELY perfect. Most do not look quite right. Here are some examples

A

Wedges are common; however perfect looking wedges are RARELY perfect. Most do not look quite right. Here are some examples

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17
Q

How to Draw Lines, when to Use Point 2 or 3

A

How to Draw Lines, when to Use Point 2 or 3

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18
Q

When Bear BOs are constantly failing at some point the market will give up and reverse and begin to Rally to the upside

A

When Bear BOs are constantly failing at some point the market will give up and reverse and begin to Rally to the upside

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19
Q

When choosing between lines with an undershoot and overshoot which point should the trader choose?

A

Choose the overshoot because lines with Overshoots make it easer to see what the market is doing

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20
Q

Wedges are Rarely Perfect, also the better looking the wedge the more likely computers will trade it as such increasing the odds that we will get a Reversal

A

Wedges are Rarely Perfect, also the better looking the wedge the more likely computers will trade it as such increasing the odds that we will get a Reversal

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21
Q
A
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22
Q

What usually is a Small Wedge?

A

It is usually a Minor BO

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23
Q

In a Wedge is the number or legs more important or is the shape of the wedge more important?

A

The number of Legs is more important than the shape

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24
Q

Many Wedges do not have a Wedge Shape

A

Many Wedges do not have a Wedge Shape

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25
Q

Most Channels are also Wedges; if they’re parallel they can be called a channel & if they are convergent they can be called a Wedge

A

Most Channels are also Wedges; if they’re parallel they can be called a channel & if they are convergent they can be called a Wedge

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26
Q
A
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27
Q

In a Channel what do I need to qualify it as a Wedge

A

I need a 3rd push to qualify it as a Wedge

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28
Q

Some computers see the Wedges that I see as something else sometimes

A

Some computers see the Wedges that I see as something else sometimes

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29
Q

They are many ways to draw the Wedge lines; 3 Pushes, Any Shape. See the Chart Below

A

They are many ways to draw the Wedge lines; 3 Pushes, Any Shape. See the Chart Below

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30
Q

With repeated Reversals from pushes down Traders will usually buy Reversals on the 3rd Push down.

A

With repeated Reversals from pushes down Traders will usually buy Reversals on the 3rd Push down.

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31
Q

Why is this an Undershoot?

A

Because Price failed to reach the Wedge,Channel line; the market tried to form a wedge Bottom but was unable to create perfect shape because the bulls too eager to buy

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32
Q

If Bulls Too Eager to Buy Wedge we get an Undershoot

A

If Bulls Too Eager to Buy Wedge we get an Undershoot

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33
Q

Can a Failed DT or DB be a variation of a 3 Push type of Wedge?

A

Yes it can, if the BO above the DT fails and reverses down it now has 3 pushes up and computers trade it like a type of wedge

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34
Q

Do Wedges need strong legs and good context?

A

Yes they do, three pushes are not enough. They have to be strong compared to the other bars and legs. The context has to make sense for the reversal. Otherwise, sideways Price Action is more likely than a Reversal

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35
Q
A
36
Q

TR often has Legs that end with Wedges

A

TR often has Legs that end with Wedges

37
Q

Failed BO above DT; 3rd Push so it is a Type of Wedge

A

Failed BO above DT; 3rd Push so it is a Type of Wedge

38
Q

Bad Wedges are not reversal setups

– Legs don’t overlap (GAPs). 80% of wedge reversal attempts in tight channel fail and become bull flags

– spacing between 3 pushes should be equal. If strong breakout start count over from 1

– Tight channels

A

Bad Wedges are not reversal setups

– Legs don’t overlap (GAPs). 80% of wedge reversal attempts in tight channel fail and become bull flags

– spacing between 3 pushes should be equal. If strong breakout start count over from 1

– Tight channels

39
Q

Good wedges

– Wedge bottom usually needs overlapping legs(stairs) to be reversal

– broad channel

– Each leg in a wedge bottom is one or more bear bars followed by doji or bull bars

A

Good wedges

– Wedge bottom usually needs overlapping legs(stairs) to be reversal

– broad channel

– Each leg in a wedge bottom is one or more bear bars followed by doji or bull bars

40
Q

Earlier entry on small time frame

If traders see a forming a wedge on higher time-frame then can look for early entry on lower time frame, looking for wedge bottom or top

A

Earlier entry on small time frame

If traders see a forming a wedge on higher time-frame then can look for early entry on lower time frame, looking for wedge bottom or top

41
Q

Strong Bears are always forming Wedge Bottoms

A

Strong Bears are always forming Wedge Bottoms

42
Q

Is a Wedge Bottom alone in a Strong Bear a good enough reason to buy?

A

No it is not, especially when the legs do not overlap, this makes the bear trend too strong to buy. And if there is no Bull Trend bars this shows zero buying pressure to overcome the strength of the bear Trend

43
Q

Are Bull Trends always forming Wedge Tops?

A

Yes they’re, created by minor profit taking by the bulls & weak bears hoping for PB that is big enough for a scalp

44
Q

Bar counting, when should a trader restart the count?

A

Restart the count after a Strong BO

45
Q

Whenever Traders are counting the legs up in a potential wedge it is important to pay attention to symmetry between wedge points. Symmetry is important because if not spaced out computers will not treat it as a Wedge Top

A

Whenever Traders are counting the legs up in a potential wedge it is important to pay attention to symmetry between wedge points. Symmetry is important because if not spaced out computers will not treat it as a Wedge Top

46
Q

Why did this Wedge Bottom Fail? (Convergent lines)

A

The channel down is too tight and it is still forming gaps that are not closing . This premise equates to a reversal potentially being minor. Therefore a reversal up will probably lead to a Bear Flag or TR

47
Q

Is a Wedge often the Final Leg in a MTR Top?

A

Yes it is, see chart below

48
Q

Is a Wedge often the Final Leg in a MTR Bottom?

A

Yes it is, see chart below

49
Q

It is important to realize in the markets most Reversals begin before the prior Trend ends, there is a transition

A

It is important to realize in the markets most Reversals begin before the prior Trend ends, there is a transition

50
Q

Can Legs be as small as one bar?

A

Yes, they can be as small as one bar; a Trader can confirm by looking at a smaller TF Chart, however this is not necessary

51
Q

Can a Wedge Bull Flag begin before the Bull Trend Reaches the Top?

A

Yes it can, See Chart Below

52
Q

Can a Wedge Bear Flag begin before the Bull Trend Reaches the Top?

A

Yes it can, See Chart Below

53
Q

Note: a Trader will make more money by trading the chart that is in-front of them and not looking at multiple charts.

A

Note: a Trader will make more money by trading the chart that is in-front of them and not looking at multiple charts.

54
Q
A
55
Q

Is a Parabolic Wedge a type of Climax?

A

Yes it is, often not a Wedge shape, 3 consecutive climaxes (BOs), Legs do not overlap, tight channel(small PBs)

56
Q

Does a Parabolic Wedge often have failed BOs?

A

Yes, the 3rd NO often falls below channel (In Parabolic Wedge Bottom) before Reversing

57
Q

Anytime the market has a Parabolic Wedge or series of Buy Climaxes a Trader has to be thinking that the market has gone too far too fast and stop is too far away traders have to take profits. Also Bulls will Buy a Bear Parabolic Wedge bottom betting on at least a small profit(Only take these trades if I can manage them well)

A

Anytime the market has a Parabolic Wedge or series of Buy Climaxes a Trader has to be thinking that the market has gone too far too fast and stop is too far away traders have to take profits. Also Bulls will Buy a Bear Parabolic Wedge bottom betting on at least a small profit(Only take these trades if I can manage them well)

58
Q

What is a Parabolic Wedge?

A

It is a Channel

59
Q

a Parabolic Wedge is a Channel (See Chart Below)

A

a Parabolic Wedge is a Channel (See Chart Below)

60
Q

Can a Parabolic Wedge be a s Spike and Channel?

A

Yes it can (See Chart Below)

61
Q

Parabolic Wedge can be a Spike and Channel

A

Parabolic Wedge can be a Spike and Channel

62
Q

It is very common for the market to enter a sideways TR after a Sell or Buy Climax instead of reversing just from the Sheer Buying/Selling Pressure of the previous move in the market

A

It is very common for the market to enter a sideways TR after a Sell or Buy Climax instead of reversing just from the Sheer Buying/Selling Pressure of the previous move in the market

63
Q

What is a Parabolic Wedge often followed by?

A

a Parabolic Wedge is often followed by an Endless PB; after I see after 5-10+ Bars that this an Endless PB and may convert into a Bear Trend

64
Q

Why is this a possible Parabolic Wedge on the open?

A

Gap up, Parabolic Wedge due to 3 pushes with lots of overlapping bars and prominent tails, no big consecutive bull trend bars = Parabolic Wedge Top on open probable reversal or TR

65
Q

Anytime I see a Strong Rally with a pause and a series of Buy Climaxes on the OPEN, I always have to be thinking about the possibility of a Parabolic Wedge. The result of a Parabolic Wedge (especially on the open) is I get a PB and the market then decides if it going to resume up or reverse down from there.

A

Anytime I see a Strong Rally with a pause and a series of Buy Climaxes on the OPEN, I always have to be thinking about the possibility of a Parabolic Wedge. The result of a Parabolic Wedge (especially on the open) is I get a PB and the market then decides if it going to resume up or reverse down from there.

66
Q

Do Parabolic Wedges need extreme moves to get exhausted?

A

Yes they do because without extreme moves traders do not get exhausted and that means the trend can go a long way.

67
Q

Parabolic Wedge - On the Open, but needs Extreme Selling to get exhausted

A

Parabolic Wedge - On the Open, but needs Extreme Selling to get exhausted

68
Q

Can a Bull Flag be a Parabolic Wedge?

A

Yes it can, as you can see on the chart below.

69
Q

Strong Trends always form Wedge Reversals; REMEMBER the 80% Rule when these wedge bottoms are forming in the strong Trend, 80% of Reversals FAIL. (Do not be to eager to see wedge bottoms in Bear Trends)

A

Strong Trends always form Wedge Reversals; REMEMBER the 80% Rule when these wedge bottoms are forming in the strong Trend, 80% of Reversals FAIL. (Do not be to eager to see wedge bottoms in Bear Trends)

70
Q

Never look for Reversal if Tight Channel; it is a BO on a higher TimeFrame (TF)

A

Never look for Reversal if Tight Channel; it is a BO on a higher TimeFrame (TF)

71
Q

Wedge Reversals in a Strong Trend fail what percentage of the time?

A

They will FAIL 80% of the time (a Bear Signal Bar alone is not enough reason to sell a Wedge, there has to be some evidence of selling pressure & and when the PBs are small and the channel is tight like this, there is no reason to sell)

72
Q

Though it is true that most Wedges in Strong Trends fail, is it TRUE or FALSE that most strong Trends end with a Wedge?

A

TRUE Many strong Trends still do end up ending with some kind of a Wedge

73
Q

Most Strong Trends End with a Wedge

A

Most Strong Trends End with a Wedge

74
Q

After Wedge Bottom Look for Targets

A

After Wedge Bottom Look for Targets

75
Q

Bear Wedge = Bull or Bear Flag?

A

Bull Flag

76
Q

Bull Wedge = Bull or Bear Flag?

A

Bear Flag

77
Q

Are Wedges usually Flags?

A

Yes they are; Remember there is a 75% chance of a BO in opposite direction of the Flag and 25% of the time we get a successful continuation BO

78
Q
A
79
Q

Failed Wedge Reversal, look for MM

A

Failed Wedge Reversal, look for MM

80
Q

Whenever I am in the process of getting some kind of BO, what should I be thinking?

A

That I will get some type of MM

81
Q

Failed Wedge Bear Flag - Bull BO

A

Failed Wedge Bear Flag - Bull BO

82
Q

Small BO of a Small BO - Type of Wedge

A

Small BO of a Small BO - Type of Wedge

83
Q

BO above Wedge Top Fails 50% of the Time

A

BO above Wedge Top Fails 50% of the Time

84
Q

Failed BO of Wedge Top, some Bears will use a Wide Stop Betting on the high Probability of the Failed BO

A

Failed BO of Wedge Top, some Bears will use a Wide Stop Betting on the high Probability of the Failed BO

85
Q

BO below Wedge Bottom Fails 50% of the Time

A

BO below Wedge Bottom Fails 50% of the Time

86
Q

Failed BO of Wedge Bottom, some Bulls will use a Wide Stop Betting on the high Probability of the Failed BO

A

Failed BO of Wedge Bottom, some Bulls will use a Wide Stop Betting on the high Probability of the Failed BO

Al Brooks Price Action Fundamentals SmithJones (28 decks)

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