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Limiotf L iabilitylDisocfWl aarirmaenrtW yh:i lteh ep ublisanhedr a uthohra veu sedt heibre st effortisnp reparitnhgib so okt,h emya ken or epresentaotriw oanrsr antwiietsrh e spetcott he accuraocryc ompletenoefst sh ec ontenotfst hibso oka nds pecificadlilsyc laainmyi mplied warrantoifem se rchantabiolrifi ttyn esfso ra particupluarpro seN.o warranmtayy b ec reated ore xtendbeyds alerse presentaotriw vreist tseanl emsa teriaTlhsea. d vicaen ds trategies containheedr eimna yn otb es uitabfloery ours ituatYioouns .h oulcdo nsuwlitt ha professiwohnearlea ppropriNaetiet.h tehre p ublishneorra uthosrh alblel iabfloera nyl ososf profiotr a nyo thecro mmercidaalm ageisn,c ludbiuntgn otl imitteods peciianlc,i dental, consequentoiroa tlh,e dra mages. Forg enerialn formatoinoo nu ro theprr oducatnsd s ervicoerfs o rt echniscuaplp orptl,e ase contaocutr C ustomeCra reD epartmewnitt hitnh eU niteSdt ateast( 8007)6 2-29o7u4ts,i dteh e UniteSdt ataets( 3175)7 2-39o9r3f ax( 3175)7 2-4002. Wileayl spou blishietbsso oksi n vaa rieotfye lectrofnoircm atsS.o mec ontetnhta atp pearisn prinmta yn otb ea vailaibnle el ectrobnoiock sF.o rm orei nformataiboonu Wti lepyr oducts, visoiutr w ebs itaetw ww.wiley.com. LibroafCr oyn grCeastsa loging-iDna-tPau:b lication BrookAs,I ,1 952- Readinpgr icceh artbsa rb yb ar: t het echniacnaall ysoifps r icaec tiofno rt hes erious trade/Ar I B rooks. p.c m.- (Wiletyr adisnegr ies) Includes index. ISBN9 78-0-470-4(4c3l9o5t-h8) 1.S tocks-Prices-dCihaartsg,r amest,c .2 .F inancial futuredsi-aCghraarmetsts,c, . 3.I nvestmeannta lysisT.i tle. 1. HG4638.7B62009 332.63'2042-dc22 2008042575 Printiendt heU niteSdt atoesfA merica. 10 9 8 7 6 5 4 3 2 Thibso oiksd edicatmeyd t htrole oev itnagl,e nted, andb eafuutldi aughtMeeresg,a n, SaknydTl easrs,, whoh avper ovimdeew di tthh ger etaejsotyo f m y life. lovaeUo fy ouv eryv,ery mucha ndt hinofky ou I witahs milaen dp ridteh rohuoguetv eryda y. Contents - - rrefa�e xiii CHArTER 1 rrl�e A�tlon 1 TrendB arsa ndD ojiB ars 7 BarB asicsS:i gnaBla rsE,n tryB arsS,e tupsa,n d CandleP atterns 11 SignaBla rsR:e versaBla rs 13 SignaBla rsO:t herT ypes 17 OutsidBea rs 36 The Importancoeft heC loseo ft heB ar 42 ExchangTer adedF unds( ETFsa)n dI nversCeh arts 45 SecondE ntries 46 Latea ndM issedE ntries 49 CHAr'fER2 1'rendlineasn d Trend Channels 51 Trendlines 51 MicroT rendlineSsm:a llS,t eepT rendliniensS tronTgr ends 55 HorizontLailn esS:w ingP ointasn dO therK eyP ricLee vels 61 TrendC hanneLli nes 63 Dueling LinInetse:r sectTirnegn dlianned T rend Channel Line 68 CHArTER 3 Trends 71 Two Legs 75 Signso fS trength 76 Common TrendP atterns 81 vii viii CONTENTS Trendf rom thOep en 82 ReversaDla y 86 TrendR esumption Day 86 TrendinTgr adinRga ngeD ays 88 TightC hannelasn dS pikea ndC hanneBlu lolr B ear 91 StairBsr:o adC hannel Trend 95 CHAPTER 4 Pullbacks 99 FirsPtu llbacSke quenceB:a r,M inorT rendlinEeM,A ,E MA Gap,M ajorT rendline 101 DoubleT op BearF lagsa ndD oubleB ottomB ulFll ags 104 EMA andG ap EMA Pullbacks 108 2 HM:I fA way fromE MA forT wo orM oreH oursT,h enF ade EMA andF irsEtM A Gap Bar 110 TrendD ay1 1: 30S topR un PullbactkoT rapY ouO ut 112 Countintgh eL egso fa Trend 114 High/Low1 ,2 ,3 ,a nd4 118 VariatioonfsH igh/Low2 Setups 128 ThreeP ushP ullbacks 132 CIIAPTER5 137 TightT radinRga nges 138 BarbW ire 142 Middloef t heD ay,M iddloef t heR ange 148 BigU p,B igD own 150 TradinRga ngesS ettinUgp TrendR eversals 152 CIIAPTER6 Breakouts 155 BreakouEtn trieisnS tronTgr end 156 BreakouPtu llbacaknsd B reakouTte sts 158 CHAPTER 7 165 MeasuredM ovesB asedo n theF irsPtu llbac(kA B CD) 165 = MeasuredM oveso n BreakoutBsa sedo n ThinA reasa nd on Flags 167 Conetnst ix ReversalOsf tenE nda tS ignal Bfarrosm P rior FaileRde versals 171 OtherP ricMea gnets 172 CHAPTER 8 Trend Reversals 175 TrendlinBer eak 184 TrendC hanneLli neF aileBdr eakoutCsl:i maxePsa,r abolas, andV Topsa ndB ottoms 187 Signso fS trengtihnt heF irsLte go fa Reversal 188 TrendsR everswei tha TestE:i thearn Undershoootr an Overshoot 190 DoubleT op andB ottomP ullbacks 202 ClimaxS:p ikea ndT radinRga ngeR eversals 207 ClimaxT:h reeP ushesa ndW edges( TrenCdh annel Line Overshootasn dR eversals) 210 ExpandinTgr iangles 215 CHAPTER "'inor ReversalsF:a ilures 221 9 FaileSdi gnaaln dE ntryB arsa ndO ne-Tick FaileBdr eakouts 222 FaileHdi gh/Low2 226 FaileHdi gheHri gha ndL owerL ow Breakouts 229 FaileTdr endlinaensd T rendC hanneLli nes 234 FaileRde versals 239 FaileFdi naFll agsT:i ghtT radinRga nge 243 FaileFdi naFll agsH:u geT rendB ar 245 FaileWde dges 247 FaileSdc alpsF:i ve-TiFcaki leBdr eakoutasn dF ailurteo Reacha ScalperP'rso fiTta rget 251 CHAPTER 10 Day Trading 255 Selectian Mga rket 256 TimeF ramesa ndC hartT ypes 258 GlobexP,r e-MarkePto,s t-Markaentd,O vernighMta rket 267 ScalpinSgw,i ngingT,r adinga,n dI nvesting 269 x CONTENTS Alwaysi nt heM arket 273 Havea tL eastT wo Reasonst oE ntera Trade 275 Enterinogn Stops 277 ProtectiSvteo psa ndG ettinTgr appedI no rO ut ofa Trade 281 £IIAPTER 1 1 The FirstH our 289 PatternRse latetdo t heP rem arket 291 PatternRse latetdo Y esterday 292 TrendB aro n GapO pen:F irsotr S econdB ar 302 GapO peningsR:e versalasn dC ontinuations 303 Trendf romt heO pen orT rendf romt heF irsBta r 305 ThirdB aro ft heD aya ndt heI S-MinuCtleo se 310 StronTgr endB arsi nt heF irsHto urO ftenP redicStt rength Lateirn t heD ayi nt heS ameD irection 311 OpeningP atternasn dR eversals 313 DoubleB ottoma ndD oubleT op Flags 317 TradinRga ngeB reakouts 319 FirsPtu llback 321 £IIAPTER 12 DetailedD ay Trading Examples 325 £HAPTER 13 Daily,W eekly,a nd Monthly£ hal'ts 331 HugeV olumeR eversals 343 £IIAPTER 14 Options 347 £HAPTER 15 Best Trades 353 MajorR eversals 357 MinorR eversaSlc alpdsu rinTgr adinRga ngeD ays 368 Pullbaciknsa StronTgr end 369 IntradaSyt ocks 374