CHAPTER 2Price Action

What is stable price action, and what are stable price patterns? They are simply actions and patterns that continue with a high rate of probability. A stock with poor price action is one that gaps up and down, retraces its moves completely, and tends to make wide channels with equal movements above and below the channel midline. By nature, such a stock has unstable price patterns; that is, just because the stock seems to be holding a trend through a cycle does not mean that it will present a trading space that is reliable. A stock with stable price action can also gap up or down, retrace completely, and make wide channels. The difference is that when such a stock enters these formations, it tends to leave them in a predictable ...

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