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Thursday, April 12, 2007

Sping Coil

Trade preparation requires close visual inspection of the congestion. Look for overall narrowing range over time rather than an isolated NR7 print. Check proportionality of the current range to the preceding trend. As the old wisdom states, the bigger the move, the broader the base. If RSI or Stochastics just begins to roll off the overbought state, the congestion likely has a long way to go before it can absorb the last rally. Remember that the most promising patterns slowly narrow toward a natural apex or ejection point before a major breakout.Volume must trend downward as congestion progresses. The lower-pane histogram should show declining interest with few jagged upticks. Intervening volume spikes that do not trigger immediate expansion reduce the odds of a clean breakout. General price direction should counter the prevailing trend but not accelerate to the downside. The most powerful trends will erupt after a correction that does not violate any significant S/R. Use Fibonacci and moving averages to cross-verify the terminus of this countertrend extreme

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