Failed A Against the Pivot

But what happens if the market does not spend enough time at the A up or down targets? Or, what happens if the market goes through the pivot but can't get all the way to the A up or down? Suppose the pivot range did, indeed, prove to be strong enough support or good enough resistance to stop a move, so that the market ran out of momentum before it reached the Point A? What would the scenario be? The answer is, a failed A against the pivot.

Since each of the concepts builds upon the other, first we'll review. As described in Chapter 1, a failed A occurs when the market touches or approaches an A up or an A down, but doesn't spend enough time there (half the duration of the opening range) to validate that point. Or, it approaches an A up or an A down, but snaps back, which we called a rubber band trade. Now, if those same situations occur with a failed A in the pivot range—meaning the market just barely makes it into the pivot range but snaps back at or before the Point A—your conviction to trade that signal increases.

Let's take an example. In Figure 3.4, you can see the pivot range for Commodity C is 20.15 to 20.25. The opening range for the following day is 20.08 to 20.13. Using a Point A differential of 7 ticks, a Point A up would be made at 20.20, which would be right in the middle of the pivot range.

Now, let's assume that the pivot range was, indeed, significant resistance. The market struggled through the first part of the pivot range but never quite made it to the Point A up. At 20.19, the market snapped back, resulting in a classic failed A up in the pivot. Thus, the failure at 20.19 is even more significant in this resistance zone. As a trader, you would most likely put those two facts together and come up with one conclusion: The risk of getting short at 20.19 is minimal. The failed A coupled

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