Trend Resumption Day
Primary characteristics of trend resumption days:
- The day has a strong trend in the first hour or so and then enters a trading range.
- The trading range lasts for hours and often lulls traders into thinking that the day will be quiet into the close.
- The trend resumes in the final hour or two.
- The second leg often is about the same size as the first leg.
- The protracted trading range is often a very tight trading range.
- There is often a breakout from the trading range late in the day that tries to reverse the trend, but it is usually a trap. The market then reverses and breaks out in the opposite direction into the close. A trap is more likely when the trading range is unusually tight.
- There is often a breakout pullback entry for traders who did not enter earlier or on the breakout.
Sometimes there will be a strong trend for the first hour or so and then the market goes sideways for several hours. Whenever this happens and especially if the sideways action is in a very tight trading range, the day is likely becoming a trend resumption day. Don't give up on the boring midday trading range, because there might be a strong trend in the final hour or so. The breakout is usually in the direction of the earlier trend, but sometimes it can be in the opposite direction and turn the day into a reversal day. For example, if the trend from the open was a bear trend, there is usually a late downside breakout from the trading range, and the day often opens near ...