Monday, August 20, 2012

Appendix- Common Variation.

The recent post, "The Mighty Appendix!", goes through the basic attributes of the pattern- The Momo Reversal with failure, "V" turn off of Support/Resistance back into the Momo and then "sign of reversal" at the original action zone of the pattern. (see JPEG within that post.)

I call it the "Appendix" because the price deviates from it's path (in this case the Momo, but the concept can be applied to any pattern) before returning. The rogue price action is pinched in a way that makes it stand out from the established PA...much like an Appendix from the small intestine! But I digress...

Sometimes, this "pinched" PA can occur before the culmination of the Momo Reversal, as in the above example. I've drawn in the PA in yellow...

The same principles apply for both variations of the pattern. Regardless of where the deviation occurs, it either allows a Momo to eventually hold, despite a strong-paced move into S/R or tags an important S/R when the Momo forms "too early".

Recognising the pattern (takes practice!) isn't enough. You also have to look at the context of the pattern. Otherwise, you won't know whether to take the original Momo or wait for an Appendix/Pattern Fail (More on the latter...later).

No comments: