Thursday, December 4, 2014

Crudeoil positional analysis 04.12.14 Update IV

Why traders don’t appreciate the value of these patterns

Having your price bouncing off that support/resistance level, is a great way of confirming the breakout. That works well for the patient trader who waits for this pullback. However, what happens more often is this …

Too often, these pullbacks and throwbacks become the bane of a trader’s life.

There is no reason for this to happen – as with most things in life, if we understand what can happen, and why it happens – we’re automatically ahead of the game.

Normally a throwback will occur when there is a high-volume breakout. Following that break, it is usual for the momentum to wane, resulting in the retracement that we see in these patterns.

Only then does the price resume the direction started by the breakout.

A neat bounce off this line will give us a clear entry level. However, as we’ll discuss in a moment – the bounce isn’t always as tidy as those in the diagrams above.