Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

CHAPTER 9

Test-and-Reject Day

The Test-and-Reject Day Model is the most common of the three Day Model Patterns and appears more than twice as much as either of the other two put together. Generally speaking, price heads off away from the Opening Range Bar (ORB) seeking a trend and taking the bulk of traders and their sentiment as to trend with it. In other words, this first trend direction of the day, even though usually doomed, is nonetheless quite convincing. But just about the time everyone has gotten the message as to the extent and direction of the trend, it runs out of gas, and becomes unable or unwilling to extend beyond this first main fractal of wave patterns at some identified level of support/resistance. Then, price reverses and makes the trip back to the ORB where it began, and then usually beyond. The action, pattern, and persistence regarding price back at the ORB becomes the hallmark and confirmation that a Test-and-Reject Day is at hand. The Trader sees these turning points as swings and trade opportunities. Tools as to how to help identify that this first trend is false will be added continually in the text to follow, in this chapter and those thereafter.

ORB Breakout plays are not married to the Persistent Trend Day alone. As there are far more Test-and-Reject Days than Persistent Trend Days, the Trader must trail his final units of any breakout position with an eye to understanding the probabilities that favor an eventual reversal. And it should not be otherwise. ...