Gap Openings without pullbacks can be hard to trade, but with some patience and a ruler there were two possible entries. After many years of watching, I am still in awe of the power of parallel trendlines.
In each case, the lower yellow trendline was drawn first from two distinct bottoms. Then a parallel line was drawn from the top that occurred between those two bottoms. A sell signal
was given when price hit the upper trendline and then fell through the short moving average.
I see the first trade as an acceptable risk, but not the second one. Notice where the measuring bottom occurred on trade number two – at precisely the 127% retracement of the mid-day pullback (from point A to point B.) I really expected a double bottom on that line. But this example shows why I consider the area from 127% to 161.8% of any retracement as a potential reversal zone. Price tends to pay attention to Mr. Fibonacci.
