Friday, August 28, 2009

J-hook pattern

The J-Hook during an uptrend:
-Needs an existing uptrend on strong volume
-Needs a price correction on lower volume (*for the difference between a price & time correction, see diagram at the bottom of the post)
-Will show price bars expanding and volume expanding at pivot
-Initial Entry: a breakout on strong volume above the previous peak
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
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The J-Hook during a downtrend:
-Needs existing downtrend that is exhibiting an exhaustion in selling pressure.
-The pivot point is usually marked by multiple doji, hammers, and other reversal candles.
-Volume will generally be higher during the downtrend, but should lighten up when most of the selling is finished.
-Initial Entry: on a strong breakout above major downtrend resistance. Usually, this is marked by a strong gap up on large pre-market volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
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The J-Hook within a neutral range:
-Needs existing neutral range on light volume.
-Mark a slight dip below the range with slightly increased volume. At this point, you won’t know that it will be a J-Hook.
-The pattern materializes when you see an immediate reversal as it reaches upper resistance pof the neutral range.
-Initial Entry: a breakout above the neutral range on strong volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.

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