Entries and Exits - continued
Exiting a trade on a bullish climax over a bullish trend channel
|A bullish climax is an ultra-high volume up bar that occurs after a stock has risen for a long time and where past previous highs are far behind. The ideal pattern of the bullish climax is a bar that closes in the middle (or below) of its daily range. The same pattern can occur over two bars. For example, the first bar closes at its high and the second bar drops past the middle of the previous up bar with both bars having ultra high volume.|
Bars 'A' and 'B':These two lows define the bullish trend line.
Bar 'C':This is the highest price between points 'A' and 'B'. A parallel line to the bullish trend line is poisitioned here thereby creating a bullish trend channel.
Bar 'D':The two up bars at 'D' are a bullish climax. Each of their volumes are ultra high and, taken together, even more important. There are two reasons to exit the trade at 'D'. First the price moved over the top of the trend channel (that's a sign of weakness) and second, the high volume and price pattern of the two bars shows professional selling.