Failed follow through Reversal

[mrwaynetan 0]

Hi guys,

 

Would be compiling a series of chart with examples on failed follow through causing a reversal in previous dominant trend.

 

Criteria

1) High volume in the dominant trend direction

2) Did not follow through to break previous high

3) Signs of opposite direction strength coming into play

 

It is a widely used technique, feel free to share the chart if you are using this technique as well.

 

 

[mrwaynetan 0]

[mrwaynetan 0]

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[mrwaynetan 0]

[Mario M 1]

Good stuff, mrwaynetan. Thanks.

[mrwaynetan 0]

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[mrwaynetan 0]

[anhkind 1]

My questions for this:

- What is your broker? Those stocks like RCON can NOT be shorted on Interactive Broker, for example, so it's good to know that some brokers have stocks for short.

- Do you have a target in mind before/after entering a trade? What is your risk/reward ratio?

- Based on the criteria:

1) High volume in the dominant trend direction:

- how high to consider high volume?

2) Did not follow through to break previous high:

- how do we know exactly when/where to enter?

- where should we put stop?

3) Signs of opposite direction strength coming into play

- what are the signs?

 

I just want to learn from your experience, so it's the best if you can share it. Thanks.

[00trader 0]

These are especially good examples for me as I tend to like reversals. Looking at these charts were a big help. I will actually reflect on these charts frequently.

[mrwaynetan 0]

Hello anhkind, thanks for asking.

 

My questions for this:

– What is your broker? Those stocks like RCON can NOT be shorted on Interactive Broker, for example, so it’s good to know that some brokers have stocks for short.

My broker is Tradezero, you can look into the broker as they have a great short list for low-float and also zero commission if you provide liquidity.

 

– Do you have a target in mind before/after entering a trade? What is your risk/reward ratio?

I don't have a target in mind most of the time before entering a trade as I find it to be too rigid. I will take profit along the way when volume slows down or the action on the tape slows down. I might only hold some to the next support or resistance level if I felt that there were still a lot of trapped traders in the trade.

 

I don't have a risk/reward in mind because you will never know how far the trade is going to run beforehand. I enter the trade with the potentiality of the trade running and also the risk I took for that potential run is reasonable.

 

– Based on the criteria:

1) High volume in the dominant trend direction:

– how high to consider high volume?

 

I can't quantify this as it is relative. It depends on the average volume of the stock. Higher volume relative to the previous few candles in the same timeframe would be considered high for me or a sudden pick up in tape action would also do the job for me.

 

 

2) Did not follow through to break previous high:

– how do we know exactly when/where to enter?

 

I usually enter when I saw the tape pick up or volume pick up after the failure to follow through action. You can also enter on the subsequent to push through on the initial dominant trend direction with low volume as this confirms the exhaustion.

 

– where should we put stop?

you can place it at the previous high/low or the follow through to take out the high of the high volume pushes on the dominant trend candle.

 

3) Signs of opposite direction strength coming into play

– what are the signs?

tape pick up or volume pick up in the reverse direction

[mrwaynetan 0]

 

 

These are especially good examples for me as I tend to like reversals. Looking at these charts were a big help. I will actually reflect on these charts frequently

 

Thanks, I will try to post more when I saw good examples.

 

 

[mrwaynetan 0]

[mrwaynetan 0]

[mrwaynetan 0]

[schaeferjjay 2]

Really excellent & helpful. Thanks MrWayne!