123 and 2B and drawing trend lines.
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123 break of up trend
1 trend line break
2 failure to make new high
X anticipation of reversal
3 penetration of previous low
(reversal confirmed)
123 break of down trend
1 trend line break
2 failure to make new low
X anticipation of reversal
3 penetration of previous high
(reversal confirmed)
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2B Rule pages 78 to 80
As mentioned in number 2 of the principles of a change of trend
some times the test of the previous high may actually break the
previous high and then fail.This one observation, considered alone,
has the greatest potential for catching the exact high.
2B rule
In an uptrend, if a higher high is made but fails to carry through,
and then prices drop below the previous high, then the trend is apt
to reverse.
For 2B's on (short term) a second high will usually occur within one day or less
of the time the first high is made.
For 2B's on (intermediate) a second high will usually occur within 3 to 5 days.
For 2B's on (long term) a second high will usually occur within 7 to 10 days.
2B LOWS
A low1
B close below low1
C BUY=break above low1
D TARGET = Previous high
E STOP LOSS=below second low
2B HIGHS
A high1
B close above high1
C SHORT=break below high1
D TARGET = Previous low
E STOP LOSS = below above second high
page 80
When trading on the 2B criterion, it is essential the you admit defeat quickly,
if the trade moves against you.
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On page 71 there are rules for drawing trend lines.
Drawing an up trend line
(1) Look for low and then high.
(2) Draw trend line from low to high with out using data beyond the high.(Important)
(3) Never cut a bar.( must)
(4) Extend trend line past high, if needed.
This may show a trend change.
AI
