P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly Trading Price Action REVERSALS P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly Founded in 1807, John Wiley & Sons is the oldest independent publishing com- pany in the United States. With offices in North America, Europe, Australia, and Asia,Wileyisgloballycommittedtodevelopingandmarketingprintandelectronic productsandservicesforourcustomers’professionalandpersonalknowledgeand understanding. TheWileyTradingseriesfeaturesbooksbytraderswhohavesurvivedthemar- ket’s ever changing temperament and have prospered—some by reinventing sys- tems, others by getting back to basics. Whether a novice trader, professional, or somewherein-between,thesebookswillprovidetheadviceandstrategiesneeded toprospertodayandwellintothefuture. For a list of available titles, please visit our Web site at www.WileyFinance.com. P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly Trading Price Action REVERSALS TECHNICAL ANALYSIS OF PRICE CHARTS BAR BY BAR FOR THE SERIOUS TRADER AL BROOKS John Wiley & Sons, Inc. P1: OTA/XYZ P2: ABC JWBT597-fm JWBT579-Brooks December 7, 2011 9:57 Printer: Donnelly Copyright (cid:2)C 2012 by Al Brooks. All rights reserved. The first edition of this book, titled Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader, was published in 2009. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. All charts were created with TradeStation. (cid:2)C TradeStation Technologies, Inc. All rights reserved. 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HG4638.B7572012 332.63(cid:3)2042–dc23 2011029299 PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly Iwouldliketodedicatethisbooktomydaughter,MeeganBrooks,whois adventurous,fearless,focused,andwise.Sheusesherboldness,commonsense, andfieryspirittomakeoursocietyabetterplace.ThedayMeeganwasborn 23yearsagowasandalwayswillbethehappiestdayofmylife. P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly Contents Acknowledgments xi List of Terms Used in This Book xiii Introduction 1 PART I Trend Reversals: A Trend Becoming an Opposite Trend 35 CHAPTER 1 Example of How to Trade a Reversal 73 CHAPTER 2 Signs of Strength in a Reversal 79 CHAPTER 3 Major Trend Reversal 83 CHAPTER 4 Climactic Reversals: A Spike Followed by a Spike in the Opposite Direction 111 CHAPTER 5 Wedges and Other Three-Push Reversal Patterns 151 CHAPTER 6 Expanding Triangles 181 CHAPTER 7 Final Flags 189 CHAPTER 8 Double Top and Bottom Pullbacks 217 vii P1:OTA/XYZ P2:ABC JWBT597-fm JWBT579-Brooks December7,2011 9:57 Printer:Donnelly viii CONTENTS CHAPTER 9 Failures 225 CHAPTER 10 Huge Volume Reversals on Daily Charts 257 PART II Day Trading 261 CHAPTER 11 Key Times of the Day 263 CHAPTER 12 Markets 271 CHAPTER 13 Time Frames and Chart Types 273 CHAPTER 14 Globex, Premarket, Postmarket, and Overnight Market 287 CHAPTER 15 Always In 293 CHAPTER 16 Extreme Scalping 317 PART III The First Hour (The Opening Range) 331 CHAPTER 17 Patterns Related to the Premarket 353 CHAPTER 18 Patterns Related to Yesterday: Breakouts, Breakout Pullbacks, and Failed Breakouts 357 CHAPTER 19 Opening Patterns and Reversals 373 CHAPTER 20 Gap Openings: Reversals and Continuations 395 PART IV Putting It All Together 401 CHAPTER 21 Detailed Day Trading Examples 403 CHAPTER 22 Daily, Weekly, and Monthly Charts 415 CHAPTER 23 Options 431