Trading extension bar signal

When market participants compete for direction control or trending securities attract a large number of buyers or sellers, the scope of intraday trading will naturally expand and contract over time. Sometimes, a single-day price bar with a closing price close to an intraday high or low carries a lot of information, and careful traders can use this information to make profitable buying and selling decisions.

These wide-range bars print above-average ranges at key market intersections, which can confirm major price developments, such as the success or failure of the moving average test. At other times, they can signal a sharp increase in momentum, giving in on one side and allowing trending securities to rise or fall quickly because the friction of the opposite position has been eliminated from the system.

In addition, legal breakouts and collapses should trigger at least one major wide-range bar because the security is breaking through an easily observable boundary, such as a trend line or horizontal resistance level. In turn, this should encourage a large number of market participants to stay on the sidelines while generating above-average emotional behavior.

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On the contrary, failure to print a large number of wide-range bars during a breakout or collapse will produce a significant divergence, which tells us to pay attention to the reversal of the trend following the crowd. Although it is not necessary to print a bar on the day of the breakout or collapse, it should appear in the broader price bar forming a rebound or selling wave.

Extended bar signal of moving average

Price entering the 50-day or 200-day Exponential Moving Average (EMA) creates special conditions for a wide range of bar signals, and traders can enter or exit in time based on the results. But patience is required, because the testing process may last for several weeks, during which the price column will be crowded, and bulls and bears are vying for dominance. This conflict may generate multiple signals. The histogram moves away from the moving average when the volume is higher than the normal volume, and then reverses to enter another test.

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Each expansion bar adds a potential theme, which will eventually produce a continuous reversal, continue the trend before the test, or continue to move continuously to break the moving average. The complexity of this testing process and its multiple incarnations may fool under-prepared traders who jump on each wide-range bar and then saw in the opposite direction.

You can improve the timing of the expansion bar signal by looking for a volume surge that shows a high emotional level. In addition, the 5,3,3 stochastic indicator improved the results after prolonged testing. Careful traders observe that the final thrust is consistent with the bullish crossover of the rebound and the bearish crossover of the decline, preferably consistent with the overbought and oversold levels.

When the real estate giant CB Richard Ellis passed the 50-day EMA’s three tests within four months, it is easy to see how the extended bar signal can benefit your bottom line:

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  1. In December, it bounced at the moving average after a long period of testing, setting the widest range in two weeks with increasing volume, and the Stochastic indicator showed a bullish crossover at the oversold level.
  2. In February, it successfully completed a 12-day test, broke the moving average of the highest volume in eight trading days, and set the widest intraday range in three weeks, and the Stochastic indicator was again at an oversold level A bullish cross is formed.
  3. In March, it ended the six-week consolidation above the moving average and the widest range bar in 2015, and the stochastic indicator jumped into the overbought level in the “random pop” buy signal, which was written by Jack Bernstein in The 1995 book “The Compleat” promoted day traders. “

Bottom line

A wide range of price bars usually generate important signals, and traders can use these signals to enter or exit in time.

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