While price bounces within a narrow range consolidation, it's bound to break out sooner or later, and today provided some examples of why a higher probability trade results from waiting out the move for a pullback.
Here was an example in
POT where price had been bouncing around in a congestion range since the previous afternoon. Notice the opening drive through the bottom of the range resulted in a snap-back to the top of its range (example in waiting for a pullback). While later in the day the breakdown pullback was easier to gauge.
Here's what I was looking at on a faster chart with entry/exit arrows:
Later in the day
POT provided an example of why not to get too eager jumping into a breach of support/range. I later missed a decent entry:
RIMM broke down from a symmetrical triangle (a form of narrow range consolidation) and pulled back before extending lower. I actually exited half at the PDL (red dotted line) before exiting the remainder at the green up arrow.
FCX; I didn't actually trade the first breakdown from consolidation, but the break-out later in the day provided a good opportunity. This highlights the concept of avoiding buying a breakout/breakdown as it's happening. If you're not in it before it breaks out, it's best to wait for a pullback before entering. In this case one might have bought the initial breakout and may have been stopped out on a return back to the congestion range. A realistic target in today's market (mixed/neutral internals) was within that PDC, PDH, or Open price range (blue dotted line, green dotted line, yellow dotted line respectively).
And finally, another one I missed today (thinking it might pull back more) was a symmetrical triangle in
IWM:
There's a clear range of where the buyers and sellers are lined up
and there's a clear consolidation pattern developing that can resolve quickly (and should resolve quickly and with volatility, as one side will have to cover).
A slightly bigger picture shows the "Death Cross" setup. When a moving average cross happens, typically the first trade in the direction of the crossover is to fade the price pullback. In this case, the 50-MA crossed under the 200-day, price pulled back to the 200-MA then continued to sell-off. It's sketchy down below from here because of the double-bottom potential.
Then, on the weekly, there's this Bullish Wolfe Wave setup taking shape...
