The Secrets of Trading The First Pullback: A Price Action Guide For Understanding Market Pullback That Works by Alwin Ng

Author:Alwin Ng
Language: eng
Format: mobi, epub, pdf
Published: 2014-03-31T23:00:00+00:00

Diagram 6‑10: Test of the Extremes

If you can, could you imagine a market that is at an extreme of a price cycle? Looking at the diagram above, imagine the market you are looking at is similar to it? Price is showing higher highs (HH) and higher lows (HL), which is a healthy indication of a bullish market.

Each time the market moves higher, there is a test of the last high because, for a new HH to exist, it needs to break and go beyond the last HH. These tests become more challenging as the market gets exhausted, and the number of buyers and sellers moves closer to equilibrium.

As you can see, the market made a recent HL and it begins to crawl higher again. With-trend traders would look for the break of the last HH again as a confirmation of a pullback. However, if the market shows signs of exhaustion, traders would be looking for those signs showing weakness and would stay out of the market until there is confirmation or even clues of reversal.

Essentially, any of the following could happen.

Lower High & Lower Low

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