Breakout. Retrace. Run. I know I come back to this pattern often when I’m discussing the markets, but it’s one of my favorites. It came up again on Friday in the eotpro live room, so I thought I’d make a video.
Here’s a screenshot of what I’m talking about (click to enlarge):
It’s very simple: when you have a S/R line of any sort, whether it’s Alla’s Average, or the edge of a congestion area, you have potential for this setup. You wait for price to break out, then retrace to the breakout point. If the retrace holds, you are looking for a signal in the direction of the breakout, in anticipation of a run. In this video, I use the LaguerreECO for the entries, but Bill’s Arrows or Everypush or Bonnie’s Bars will do the job as well. You basically want some kind of confirmation that price is initiating its run.
Here’s a video where I go through the the whole of Friday’s action:
This is a very quick yet elegant explanation of congestion and subsequent moves in the market. This is the way the market acts almost everyday. I appreciate your effort and I am always eager to read your blog. Keep up the good work Richard. What happened to the “pat me on the back” buttons?
Thanks, Andrew, I’m glad you liked it. I lost the pat on the back thing when I switched blog templates. I haven’t had the energy to bring it back. Instead I’ve opened up the comment moderation a bit, so that I don’t have to approve every single comment that comes through.
This is a great little trick, and so clearly explained. And entertaining during congestion….
Something very similar to the Laguerre ECO is in my Trader’s Toolkit from Jan Arps, and is called the “Price Leader.” Almost identical when plotted above each other. And he charged for it!
Thanks!
I’m not surprised on the price leader thing, dude. I was working with one of our clients a few weeks ago and saw a VERY expensive indicator (in the $thousands) that was just a smoothed out keltner channel. I recognized it in like 5 seconds.
It’s stuff like that which makes people so cynical toward my EOTPro stuff. I’m trying to show people that my contributions to EOTPro are not the obvious and simple indicators that often show up for sale.