Chapter 15: Trend Ending #2 – The Massive Reaction Against the Prevailing Trend
“Broadening is seldom a reliable continuation pattern.”
– David Fuller
What we will cover in this chapter
- Failed breaks and loss of momentum are clues that the imbalance of supply and demand is changing. However, a massive reaction against the prevailing trend is categorical evidence that something big has happened. The size of the counter-trend move is such that it forces investors to reassess. In this case reassessment means reversal.
- The proverbial bolt from the blue can happen so fast that it takes time for the crowd to catch on, so type-2 endings are often followed by a period of ranging or ‘right-hand extension’ as the impact of the price action is ...