First, if you have a Digg account go show some "Digg love" to Jon from "Five Rules For Life" - digg this post.
"Comments" have been on fire the past week - a lot of people are posting questions, trades, thoughts - and there is good interaction and discussion between the participants. A few highlights:
Sunyata made a trade in SHPGY on Thursday that falls into the "top out" category; her his (no offense intended) entry was a break of the third bar low:
RJ discussed a trade in WFMI. It was a variation of the "perfect pullback"; his entry was a break of the sixth bar high. He said "I don't know if X would have taken my trade because my trigger bar was red, but I liked it because it could not push down below that support and closed on it." The support he was referring to is the halfway point between the morning's high and the 50% retracement (white dashed line). RJ is right - I do like the entry bar to be green, but I also like the bullish action he described.
Earlier this month someone asked about the "perfect pullback" setup and specifically if DO on 0209 fell into that category; they entered the trade on a break of the sixth bar high and were stopped out later in the day. Looking at DO, I would not have considered this a valid setup. There are many reasons but the most glaring is the break of the 50% retracement on two very weak bars (the third and fourth). DO seemed destined to fail at the first resistance, and it did (the white dashed line).
Compare DO to HIG which setup on that same day. HIG also pulled back on the third and fourth bars, but they were much more orderly than the same bars in DO and - more importantly - the fourth bar bounced off the 50% retracement and left a lower tail. The fifth bar rallied and closed just above resistance (the white dashed line). Entry was on a break of the fifth bar high and the trade was good for just over 3% before it failed at the halfway point between the high and the FE. HIG is not the best example, as most of these setups will run to the FE and beyond...but I wanted to post a trade from the same day. I will highlight more in the upcoming days.
Study both charts and look at the difference in the price action. The quality of the pullbacks on both should be apparent.