Reading
Price Charts
Bar by Bar
The Technical Analysis of Price
Action forthe Serious Trader
AL BROOKS
WILEY
John Wiley & Sons, Inc.
Contents
Preface
CHAPTER 1
xlii
Price Action
1
Trend Bars and Doji Bars
Bar Basics: Signal Bars, Entry Bars, Setups, and
Candle Patterns
Signal Bars: Reversal Bars
Signal Bars: Other Types
Outside Bars
The Importance of the Close of the Bar
Exchange Traded Funds (ETFs) and Inverse Charts
Second Entries
Late and Missed Entries
11
13
17
36
42
45
46
49
CHAPTER 2
51
Trendlines and Trend Channels
7
Trendlines
Micro Trendlines: Small, Steep Trendlines in Strong Trends
Horizontal Lines: Swing Points and Other Key Price Levels
Trend Channel Lines
Dueling Lines: Intersecting Trendline and Trend
Channel Line
51
55
61
63
CHAPTER 3
71
Trends
Two Legs
Signs of Strength
Common Trend Patterns
68
75
76
81
vii
Viii
CONTENTS
Trend from the Open
Reversal Day
Trend Resumption Day
Trending Trading Range Days
Tight Channels and Spike and Channel Bull or Bear
Stairs: Broad Channel Trend
•
CHAPTER 4
Pullbacks
First Pullback Sequence: Bar, Minor Trendline, EMA, EMA
Gap, Major Trendline
Double Top Bear Flags and Double Bottom Bull Flags
EMA and Gap EMA Pullbacks
2 HM: If Away from EMA for Two or More Hours, Then Fade
EMA and First EMA Gap Bar
Trend Day 11:30 Stop Run Pullback to Trap You Out
Counting the Legs of a Trend
High/Low 1, 2, 3, and 4
Variations of High/Low 2 Setups
Three Push Pullbacks
CHAPTER 5
Trading Ranges
82
86
86
88
91
95
99
101
104
108
110
112
114
118
128
132
137
Tight Trading Ranges
Barb Wire
Middle of the Day, Middle of the Range
Big Up, Big Down
Trading Ranges Setting Up Trend Reversals
138
142
148
1 50
1 52
CHAPTER 6
155
Breakouts
Breakout Entries in Strong Trend
Breakout Pullbacks and Breakout Tests
1 56
158
CHAPTER 7
165
Magnets
Measured Moves Based on the First Pullback (AB = CD)
Measured Moves on Breakouts Based on Thin Areas and
on Flags
165
167
Contents
ix
Reversals Often End at Signal Bars from Prior
Failed Reversals
Other Price Magnets
171
1 72
CHAPTER 8
175
Trend Reversals
Trendline Break
Trend Channel Line Failed Breakouts: Climaxes, Parabolas,
and V Tops and Bottoms
Signs of Strength in the First Leg of a Reversal
Trends Reverse with a Test: Either an Undershoot or
an Overshoot
Double Top and Bottom Pullbacks
Climax: Spike and Trading Range Reversals
Climax: Three Pushes and Wedges (Trend Channel Line
Overshoots and Reversals)
Expanding Triangles
CHAPTER 9
Minor Reversals: Failures
184
187
188
190
202
207
210
215
221
Failed Signal and Entry Bars and One-Tick
Failed Breakouts
Failed High/Low 2
Failed Higher High and Lower Low Breakouts
Failed Trendlines and Trend Channel Lines
Failed Reversals
Failed Final Flags: Tight Trading Range
Failed Final Flags: Huge Trend Bar
Failed Wedges
Failed Scalps: Five-Tick Failed Breakouts and Failure to
Reach a Scalper's Profit Target
2 51
CHAPTER 10
255
Day Trading
Selecting a Market
Time Frames and Chart Types
Globex, Pre-Market, Post-Market, and Overnight Market
Scalping, Swinging, Trading, and Investing
222
226
229
234
239
243
245
247
256
258
267
269
X
CONTENTS
Always in the Market
Have at Least Two Reasons to Enter a Trade
Entering on Stops
Protective Stops and Getting Trapped In or Out
of a Trade
CHAPTER 11
273
275
277
281
The First Hour
289
Patterns Related to the Premarket
Patterns Related to Yesterday
Trend Bar on Gap Open: First or Second Bar
Gap Openings: Reversals and Continuations
Trend from the Open or Trend from the First Bar
Third Bar of the Day and the 15-Minute Close
Strong Trend Bars in the First Hour Often Predict Strength
Later in the Day in the Same Direction
Opening Patterns and Reversals
Double Bottom and Double Top Flags
Trading Range Breakouts
First Pullback
291
292
302
303
305
310
CHAPTER 12
Detailed Day Trading Examples
325
CHAPTER 13
Daily, Weekly, and Monthly Charts
331
311
313
317
319
321
Huge Volume Reversals
343
CHAPTER 14
Options
347
CHAPTER 15
Best Trades
353
Major Reversals
Minor Reversal Scalps during Trading Range Days
Pullbacks in a Strong Trend
Intraday Stocks
357
368
369
374
Contents
xi
Trading Guidelines
381
Glossary
387
About the Author
395
Index
397
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