How Zigzags and Flats Set Up a Trade for the Next Impulse Wave
The three essential parts of a trade are analyzing price charts, formulating a trading plan, and managing the trade.
Trading a Zigzag in Caterpillar (CAT)
In Caterpillar (CAT), we’ll examine each component to better understand why CAT offered a high-confidence trade setup.
1. Analyzing the Price Charts
When it comes to trade setups, it doesn’t get much easier than the price chart of CAT from April and May 2011. As you can see in Figure 2.1, prices fell in five waves from 116.55 to 108.39. This wave pattern was significant because impulse waves identify the direction of the larger ...
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