Thursday, September 18, 2008


Most of the time , the markets are not in a trending mode but rather in a lateral range.On such occations, the market is in a relative state of harmony with neither the bulls nor the bears in charge.As previously mentioned when the markets are in a state of 'WA' , they will trade in a quiet, horizontal band.At times , however, the bears or bulls may assault a prior high or low level.
Trading opportunities can arise in these occations, specifically if there is an un sustained break-out from either a support or resistance level, it can present an attractive trading opportunity.
In such a scenareo there is a strong probability there will be return to the opposite side of the congestion band.This type of false break-out is called upthrust.If the upthrust coincides with a bearish candle stick indicator it is an appealing opportunity to short.
The opposite of an upthrust is the spring.The spring develops when prices break through aprior low.Then prices spring back above the broken support area.In other words new lows could not hold.Buy if prices push back above the old lows.The objective would be for a retest of the congestion zones upperband.The stop would be under the lows made on the day of the spring.
Trading springs and upthrust is so effective because they provide a clear target(the opposite end of the trading range) and protective stop(the new high or low made with the false break out).Springs and upthrust work very well. Muraleedharan

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