Option and Stock Trading with sdh

[Breakout]

Here is one more piece to your puzzle "The Whipsaw". Obvouis we want to buy line 1 & 3 and buy the pullback in 2 &4 which is easy to say harder to do lol. Notice on the chart line 4 pulls back then line 5 starts and tops. Now we are getting a reversal and would most likely be seeing overbought conditions etc. Line A is the new trend and line B is the pullback of the line A. Many will see line A as a pullback and go long when they see line B starts but in reality its the start of the bear or transition to a bear. By the way the point of 3/4 is the left shoulder, 5 is the head and a/b is the right should of a head & shoulder. The confirmations of reversal is when line C breaks below the invisable line of 4 & A.

I got off track, the point being from the top of line 3 and the bottom of C we would be getting whipsawed if we were thinking long. Knowing this and recondizing the tops and transitions will save you a lot of bad trades. Also notice if we use breaking last highs as confirmation when we are first starting trading options prevents being faked out in line A, B, and C. We are seeing this trend in the spy/market. See if you can find the pattern or at least learn to put a top line on 5 and a bottom line on 4 and when one of those get broken you buy the direction.

Again studing elliot waves even if you do not plan on using it will help you understand how price moves in waves and what to look for in transition from one trend to the other.