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Hi jjthetrader,
Thank you very much for your excellent analysis. You suggested going long after confirmed test somewhere around 14650 level. If you were going long there where would your stop be?
One more question. Could two up bars following the big down bar that I marked 1 be considered tests? They went down to the area of the last big down bar on lower volume. I am not sure what the formal definition of the test is. Opening and closing in the middle confused me.
Thank you,
Leonid |
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Personally my stop would be just below the test. That area was tested for supply already and if price moves back into that area with volume then I'd want to be out, it would be a failed test. For those with larger account sizes you could probably put your stop below the last swing low.
A close in the middle is acceptable for a test. The volume is what's important. The test I showed you wasn't exactly perfect that's why you wait for the confimation bar.
Those two bars after the down move I wouldn't call tests. They're more of a consolodation working out the balance of supply and demand. Since they inch up slightly demand is overcoming any supply but the closes in the middle aren't that impressive. That's why you want a test.
Hope it helps.