Well hopefully that first primer helped you out and you are ready to embark on a mentally arduous journey of learning technical analysis. I could barely get through Stephen Hawkings, The Universe. I was up all night working on the mathematical models that he was proposing. Yes 1 single night! I really wished I could have finished the first chapter of that book without falling asleep in a pool of drool. And I went to Cambridge, so I should be mentally capable. Cambridge, Ontario Canada. It was a quaint town. So if I am far from smarter than a 5th grader, the concepts herein should be child’s play for you.
Lets Review
Legs have ranges. You know like a normal leg, you got the foot of the leg that ends at the butt. If you pass, the foot of the leg, you will go to the next significant support. If you pass the top of the leg, you will go to the next significant resistance. Legs contain significant levels in between. These levels must be respected as you go up and down the leg. Like when you were a teenager and hot and excited at the prospect. You decide to kiss from the foot and because you’re a teen, hurriedly thought you could kiss all the way to the upper parts. But what happens? You nearly bleed to death, because you busted your nose on her knee. Ouch! Epic Fail!! In the market action, the levels within the legs will repel the price action on the first try. If you don’t respect that, you bleed your account. The segmentation of the legs is important to understand. You will be repelled most by the support of each of those segments. There are hidden segments that may be old significant levels. These levels may not appear as segment in the leg because it was by passed due to the setup that created the leg. During the formation, hidden levels on the leg, was respected earlier. So when the leg formed, it was on 2nd touch situations. Okay take 3 seconds to alleviate your feelings of nausea. This is daunting stuff.
Lets move on
So when you finally get to a more significant level of support as CL did here, The accumulations of the lower time frame slowed the momentum of the bears and allowed the bulls to take control of the price action. One method, it employs, is the formation of the John Carter, h. I say John Carter, because he observed and noted in one of his videos, that after selling the market pops and drops back down and forms this h pattern. Essentially, what this h pattern is, is the result of 1st touch / 2nd touch.
There are 3 things to note on this “h” move. The first thing is that price action pops to the most significant resistance. This resistance is going to be the previous support lost. Always. The second thing you will note is how high the macd elevates. The 3rd thing to note is how high the macd is when it creates a new low or failed new low. Hmm…is this des ja vu? Okay, I’m not going to be cute about it, I’m talking about accumulation. Just because I talk about new stuff, doesn’t mean I’ve abandoned the old.
What is really happening in an “h” move.
As you recall 1 in the chart is a 1st touch scenario as it attempts to retrace back up the leg. The resulting accumulation confirmed by the new low on higher macd, qualifies it. But, in this hourly chart is actually late in confirming the action. The accumulation occurs in the lower time frames first. Buckets. Changes in momentum happens in the lower time frames first.
The accumulation at the new low also represents a few things. First the new low is also a 1st touch scenario. You bounce again on more bullish sentiments via momentum. This momentum was enough to carry the price back up to 1, and so on 2nd touch scenario, you approach the next level of resistance. The previous support you lost at 2. And at 2, it will become a 1st touch scenario. On these pops, the price sells back down. It will go back down to previous support. You will start to distribute long before you get to that target on the upside. Because the price just doesn’t drop unless it is setup to do so. So where would you see it? In the lower time frames again. Buckets of fun.
The next thing to note, is the pop back up. On the pop back up, to 1, the leg of interest for you to reference is the primary leg. That is where you will reference the levels that are significant. On the drop back down, you will not reference the primary leg, but the leg that brought you up. So from the bottom of the primary let to the top of 1. You will also be wary about the level below the bottom of the primary leg, because it is a 2nd touch situation. And if the bottom of the primary leg is not a longer term level, making it more significant, you will go to the next level of support down. This is what I mean about referencing the current price action to the leg immediate to the left and reference that leg to the leg immediate to its leg so you never lose site of the progression. Okay, I wouldn’t want you to get brain damage on all these mind blowing stuff here. But we are all rocket scientist, and brain surgeons, so this stuff is all trivial.
I’m gonna quote my buddy lakai.
BIG thing..Lakai said it perfectly..#1. learn how to read a chart #2. learn your techs #3…TRUST yourself
So far, we’ve tried to touch on all the concepts we’ve discussed in this blog to wrap up all the simple techs we play with. This is how you should think and work.
Why?!!!
Market just tanked on the “news”. So how does this look technically?
So simple my 4yr old can do it. Watch how its done Lakai style.