What a reversal day — the bears were mauled today!

The day started out looking like the Breakdown Bar Failure (BDF) I suggested would set up after Monday's breakdown — and could move prices higher — was going to be a Failure itself.

I thought, “Oh boy, Mr. Schizophrenic has struck again, this S&^ks.”

Considering our market internals prior bullish signal — and the potential of the BDF only being disrupted by the tariff war news — we went into “Intelligent Hope Mode.”

The best setup can be ruined by the news that surprises investors and traders  The price patterns we trade like the Breakdown Bar Failure that I described on Monday night — and anticipated would form — do have varying degrees of follow through.

This can be based on the trend, the location of prior support, resistance, multiple time frame alignment — or the lack thereof — and other market forces.  All different flavors, so to speak.

Those price patterns signal a move in a direction of up, down, or sideways; and those patterns are formed by the participates that created them — with real money!

Master Trader Tip: Price patterns are a picture of traders' expectations

When there is a shock — like today's news — to those participates their reaction, which can be an overreaction can totally negate the setup.

At the moment, we don't know if the reaction is going to feed on itself or not, so we have to have our lines in the sand and rules how to handle the situation.

The open was bearish, but those reacting without a plan got hurt. We held, the plan worked and it paid off.

 

Let's Review Today's Action

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Happy trading!  If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com

All the best,

Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End

Dan Gibby
Chief Options Strategist

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