Echos for Profit
Friday I pointed out a rectangle pattern on the 15 minute chart, and today we broke down through its bottom. Trading patterns such as rectangles or triangles involves recognizing repeating structures in the market — so does trading Fibonacci setups.
Usually the repetition is one of style, but today we saw an extremely close duplicate of the market moves from last Thursday (see Multiple Reasons.) After reading this commentary scroll down and look. You’ll see that I have marked the two charts in almost exactly the same way.
We started with a little pop into resistance, and then made a decline that covered all of Friday’s range. Bouncing from the bottom, the market made a small a-b-c move with the “c” move equaling 62% of “a.” Just like Thursday, there was a nice Stochastic divergence on a shorter time frame (not shown - see Thursday.) Once again this trade, if successful, will break out of a consolidation range.
As the market continues down, there is a Measured Move where the larger “C” equals the earlier “A.” The only real difference between today and Thursday was that this A-B-C took about 90 minute longer. Make a close comparison between these two days, and memorize this pattern. I think you’ll find the exercise quite profitable.
