Chapter 10
Other Magnets
There are many other price magnets that will tend to draw the market toward them for a test. Here is a list of some. Many of these are discussed elsewhere in the books. When a market is trending toward a magnet, it is prudent to trade with the trend until the magnet is tested and preferably overshot. Do not trade countertrend at the magnet unless there has been some prior countertrend strength like a trend line break, or unless the move is a pullback in a higher time frame trend.
- Trend lines.
- Trend channel lines.
- Any measured move target including a leg 1 = leg 2 projection.
- Spike and channel: the start of the channel is usually tested before long.
- High, low, open, and close of yesterday.
- Swing highs and lows of the past few bars or even days, often setting up double bottom bull flags and double top bear flags.
- Breakout points.
- Gaps of any kind, including moving average gaps.
- The extreme of a trend after every type of pullback (see Chapter 11 on the first pullback sequence).
- Trading ranges from earlier in the day or prior days, including tight trading ranges and barbwire: the extremes and the middle often get tested.
- The approximate middle of the range on a trading range day, especially if there is an intraday trading range in that area (a fat area).
- Final flags: after the breakout from the flag, the market comes back to the flag and usually breaks out of the other side.
- Barbwire.
- Entry bar and signal bar protective stops.
- Entry price (breakout test). ...
