Reading Price Charts Bar by Bar

AL BROOKS is a technical analysis contributor for Futures magazine and an independent day trader. His approach to reading price charts was developed over two decades in which he changed careers from ophthalmology to trading. Brooks graduated from The University of Chicago Pritzker School of Medicine in 1978 and received a BS in mathematics with honors from Trinity College in 1974. His website, brookspriceaction.com, outlines his trading approach and views as well as hosts a subscription-based daily trading chat room in which Brooks talks with other traders about the market.

• Preface xiiiChapter 1 Price Action 1Trend Bars and Doji Bars 7Bar Basics: Signal Bars, Entry Bars, Setups, and Candle Patterns 11Signal Bars: Reversal Bars 13Signal Bars: Other Types 17Outside Bars 36The Importance of the Close of the Bar 42Exchange Traded Funds (ETFs) and Inverse Charts 45Second Entries 46Late and Missed Entries 49Chapter 2 Trendlines and Trend Channels 51Trendlines 51Micro Trendlines: Small, Steep Trendlines in Strong Trends 55Horizontal Lines: Swing Points and Other Key Price Levels 61Trend Channel Lines 63Dueling Lines: Intersecting Trendline and Trend Channel Line 68Chapter 3 Trends 71Two Legs 75Signs of Strength 76Common Trend Patterns 81Trend from the Open 82Reversal Day 86Trend Resumption Day 86Trending Trading Range Days 88Tight Channels and Spike and Channel Bull or Bear 91Stairs: Broad Channel Trend 95Chapter 4 Pullbacks 99First Pullback Sequence: Bar, Minor Trendline, EMA, EMA Gap, Major Trendline 101Double Top Bear Flags and Double Bottom Bull Flags 104EMA and Gap EMA Pullbacks 1082 HM: If Away from EMA for Two or More Hours, Then Fade EMAandFirstEMAGapBar 110Trend Day 11:30 Stop Run Pullback to Trap You Out 112Counting the Legs of a Trend 114High/Low1,2,3,and 4 118Variations of High/Low 2 Setups 128Three Push Pullbacks 132Chapter 5 Trading Ranges 137Tight Trading Ranges 138Barb Wire 142Middle of the Day, Middle of the Range 148Big Up, Big Down 150Trading Ranges Setting Up Trend Reversals 152Chapter 6 Breakouts 155Breakout Entries in Strong Trend 156Breakout Pullbacks and Breakout Tests 158Chapter 7 Magnets 165Measured Moves Based on the First Pullback (AB = CD) 165Measured Moves on Breakouts Based on Thin Areas and on Flags 167Reversals Often End at Signal Bars from Prior Failed Reversals 171Other Price Magnets 172Chapter 8 Trend Reversals 175Trendline Break 184Trend Channel Line Failed Breakouts: Climaxes, Parabolas, and V Tops and Bottoms 187Signs of Strength in the First Leg of a Reversal 188Trends Reverse with a Test: Either an Undershoot or an Overshoot 190Double Top and Bottom Pullbacks 202Climax: Spike and Trading Range Reversals 207Climax: Three Pushes and Wedges (Trend Channel Line Overshoots and Reversals) 210Expanding Triangles 215Chapter 9 Minor Reversals: Failures 221Failed Signal and Entry Bars and One-Tick Failed Breakouts 222Failed High/Low 2 226Failed Higher High and Lower Low Breakouts 229Failed Trendlines and Trend Channel Lines 234Failed Reversals 239Failed Final Flags: Tight Trading Range 243Failed Final Flags: Huge Trend Bar 245Failed Wedges 247Failed Scalps: Five-Tick Failed Breakouts and Failure to Reach a Scalper’s Profit Target 251Chapter 10 Day Trading 255Selecting a Market 256Time Frames and Chart Types 258Globex, Pre-Market, Post-Market, and Overnight Market 267Scalping, Swinging, Trading, and Investing 269Always in the Market 273Have at Least Two Reasons to Enter a Trade 275Entering on Stops 277Protective Stops and Getting Trapped In or Out of a Trade 281Chapter 11 The First Hour 289Patterns Related to the Premarket 291Patterns Related to Yesterday 292Trend Bar on Gap Open: First or Second Bar 302Gap Openings: Reversals and Continuations 303Trend from the Open or Trend from the First Bar 305Third Bar of the Day and the 15-Minute Close 310Strong Trend Bars in the First Hour Often Predict Strength Later in the Day in the Same Direction 311Opening Patterns and Reversals 313Double Bottom and Double Top Flags 317Trading Range Breakouts 319First Pullback 321Chapter 12 Detailed Day Trading Examples 325Chapter 13 Daily, Weekly, and Monthly Charts 331Huge Volume Reversals 343Chapter 14 Options 347Chapter 15 Best Trades 353Major Reversals 357Minor Reversal Scalps during Trading Range Days 368Pullbacks in a Strong Trend 369Intraday Stocks 374Trading Guidelines 381Glossary 387About the Author 395Index 397

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