This Pattern Keeps Working
Astute traders
remark how patterns often work out in threes. Triple tops, three up
(impulse) waves in an Elliott wave pattern, and three bars in a pullback all
serve as examples.
While patterns rarely repeat exactly, it is to your advantage to recognize
patterns such as three-bar pullbacks and consider trading off them when setups
are triggered and market dynamics are right.
Pullback From Lows (and highs) are setups we screen for daily on the Futures
Indicators Page. The idea underpinning a pullback setup is that a market in
motion will stay in motion and will continue lower after a three-bar reaction.
November natural gas
(
NGZ1 |
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News |
PowerRating) was the biggest mover on a percentage basis and
perhaps the most dramatic example of how powerful this setup can be. Nat gas
lapped lower and made good almost from the get-go, triggering the pattern after
trading below the low of the high bar in a three-bar pullback: a classical
1-2-3-4 Pullback From Lows setup. Nat gas closed 7% lower.
Also moving lower, February pork bellies
(
PBG2 |
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PowerRating) slipped a hearty 1.900 out
of a three-bar pullback.
Of course, this pattern can cut both ways. Today, the only setup on the Pullback
From Highs List, British pounds
(
BPZ1 |
Quote |
Chart |
News |
PowerRating), extended to close at a multi-month
high out of a three-bar pullback.