Chapter 23

Trend from the Open and Small Pullback Trends

Primary characteristics of trend from the open days:

  • The low of a bull trend day or the high of a bear trend day is formed within the first few bars of the day.
  • If the opening range of the day is less than 25 percent of the average daily range of recent days, there may be a double bottom on a bull trend day or a double top on a bear trend day (if the opening range is about 50 percent of the average daily range, a breakout is more likely to lead to a trending trading range day).
  • The day may begin with a strong spike lasting many bars or it may have a small opening range.
  • If the market trends from the first bar or so and the initial spike lasts three or more bars, entering on the first pullback is usually good for at least a scalp.
  • If there is a strong spike on the open that lasts many bars and covers many points, the day will usually become a spike and channel trend day.
  • A large gap opening often leads to a trend from the open day, and the trend can go in either direction. When there is a large gap up and a trend from the open day forms, the day will be a bull trend day about 60 percent of the time and a bear trend day 40 percent of the time. The opposite is true for gap down openings. The larger the gap, the more likely the day will be a trend day and the more likely the trend will be in the direction of the gap.
  • Trend from the open days have urgency and conviction from the outset and are usually the strongest trends and ...

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