IMPROVING YOUR CASE FOR A TRADE

Breakouts and a broken (temporary) market are an excellent combination.  But knowing where to look for a trade will improve your ability to be successful with the BO.  The better your case for a trade, the higher the probability it will be successful.

TODAY:     (check out our 6E post too!)

When playing the breakouts, we want to look for key signs to improve our odds for a successful trade.  The risk is a failed breakout, and that risk can be a move to the opposite target.  Today, that would be a move from 48.50 to 54.5, but no one would ever suggest you hold for a negative 6 points.

B3 hit briefly, and pulled back.  So why is it a riskier (I did not take) trade, even if you have a 5-8t stop, and what suggested it could be a failed breakout?

1. Look to the left of the yellow BO bar. We have a failed bar above our BO.  Shows buyers.
2. We have small body bars at the EMA prior to the open.  Suggests indecision as to direction.
3. Bars 1 and 2 probe, but pullback to EMA.  1350 still has buyers; psychological point as well.
4. B3 pushes; is looking good, but it is the FIRST test.  They tend to fail.  B3 would be much better had it moved passed the target with vigor, allowing an entry on a pullback.

Building the case:

Bars 4 and 5 fail at the EMA and we have a symmetrical triangle pattern developing between our target and the EMA, which is rolling over.  The target is 2t below b4 and 5.  A common short play here would be 1t below.  The EMA weakness, and bar structure provides an improved chance that the second BO will be successful.

The second build-the-case is in the second target zone.  Although we traded at the EMA, the upper BO worked as well.

1. Bars 50-53 are small body closing below our target.  Market will break, or fade and rollover.
2. B54 test the target.
3. B55-57 reverses and stall at the EMA.  This provides support, and potential for a second test.
4. B58; Home run.
5. B58 is the candle with "vigor."  Had it occurred earlier, we would look for a pullback in the candle to enter, or enter at the close.  Above the target, but still a valid trade with potential.

Build your case.  Improve your odds for success.


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