Trading Trend Days
The market made a small gap down from yesterday’s close, and three minutes later it was off to a TREND DAY. Remember from the definition, the open and the close are at opposite ends of a wide range day, and the afternoon session is usually similar to the morning. Today’s open was 1.1 points from the bottom, and today’s close was 0.7 points from the top.
Our last trending day was a little more symmetrical than this one, with an almost perfect match between the morning and afternoon ranges. Today it was 11.3 points versus 10.0. Still pretty close. And once again there was a mid-day pause that didn’t lose very much of the morning gain.
The pause took the form of a rectangle, similar to the one we had on Monday. However this time the rectangle was a continuation pattern rather than a reversal. Notice the volume drop (not surprising during lunchtime), and especially the large increase in volume on the breakout. On rectangles, light volume upside breaks are likely to be fakes.
If you believed the pattern, you had plenty of time to take a position before the move continued. In my case it was only on the breakout that I recognized a probable trend day and started looking for an entry to hold through the close.
