NR7 and Trend Days
A range of 7.2 points on the Russell 2000 makes this a narrow range day. The question that often comes up after a day with limited movement is “What comes next?” Many say narrow range days are followed by wide range days. Sometimes. But perhaps not as often as traders think.
I don’t trade statistics as such, but I decided to do some checking. For a TREND DAY I required a range greater than 1.5 times the recent average, and for the open and close to be near the extremes of the range. (The distance between the open and close had to take up at least 80% of the bar’s range.) For a narrow range day I used Toby Crabel’s NR7 — the narrowest range in the last seven days.
On the Russell 2000, going back about 8 1/2 years, there were 150 trend days (about 7%) and 275 NR7 days. Unfortunately only 25 of the narrow days directly preceded a truly wide range day. Not as good a I had hoped, but still enough to think “possible trend” after a day such as this one.
But even on narrow days there are sometimes a few trades if you are patient. Notice the 10:00 trade where price pulled back to a Fibonacci cluster - an important Fib measurement from two or more different sources. Combine that with an overbought Stochastic and there were two reasons to at least consider the trade.
