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Beat the Street: A Trader's Guide to Consistently Scoring in the Markets by Adrian Manz

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Chapter 14. Momentum Reversals

WHEN AN expansion-of-range-and-volume trade sets up, sometimes the market response is to pass on the previous day’s momentum and let the stock retrace a portion of the expansion move. The momentum reversal gives us an intraday entry opportunity just when we would have otherwise thought that a pattern was going to fail to hand us profits.

Pattern failures are a disappointing fact of a trader’s life. In the case of a failed expansion-of-range-and-volume set-up, however, they can be the seeds of opportunity. The momentum reversal relies on the propensity of wide range days to be followed by additional volatility, even if the result is not follow-through. Basically, the trade is a means of anticipating the fear ...

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