NBar Rallies Declines

n-Bar Rallies/Declines

Stocks making new Highs and new Lows with high volume attract momentum players. Momentum players continue to push these stocks until the supply or demand diminishes. But as in any rally or decline, these trends stop and reverse. The prices become oversold and overbought creating a condition for exhaustion of the supply and demand. Hence, if these prices reverse (could be brief), an opportunity is presented. Traders who wait and take advantage of these counter-trades are daring and risky, but they do present a healthy risk/reward profit ratio. The popular trading strategy is to wait for the trend to stop and reverse. The n-Bar Rally/Decline setup presents a technique of trading these counter-trend setups.

Trade: The n-Bar Rallies/Declines build up on based on new-highs and new-lows setups. Prices must make at least a 21 -bar new high and new-low, and at least 3 new highs or 3 new lows successively-the higher the number, the better the pattern result. After an exhaustion move, enter a long one tick or 5 cents above the last falling bar's high, or enter a short one tick below the last rising bar's low.

Stop: Place a "stop" order one tick below the low of the falling bar in a long setup, or place a "stop" order one tick above the high of the rising bar in a short setup.

Target: Place a target 62% to 100% of the entire range of n-bar Rally/Declines for long or short setups. The other targets could be a major "swing high" or major "swing low" prior to the n-Bar setup.

n-Bar Rally

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New Lows

Trading 11-Bar Rallies/Declines

NewLows

NewLows

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829.00i

828.00

827.00;

826.00;

825.00

824.00

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823.00

822.00 i

Trading n-Bar Declines

The example above illustrates an n-Bar Decline pattern from the Russell 2000 Emini chart. On May 10, 2007, ER2 sold off in the pre-afternoon session and started to make new lows around 12pm. Six new lows bars were traded before a reversal bar triggered a trad above the previous bar's high. This scenario presented a trade long in the downtrend.

1. Enter a "long" trade one tick above the previous bar's high at 822.7.

2. Place a "stop" order below the low of the n-Bar decline at 821.6.

3. Target between 62% and 100% of the n-Bar decline range from 824.8 to 826.

Trading n-Bar Rallies/Declines

4 Stop

64.00

62.00

4 Stop

Range Bar Trading

62.00

56.00

54.00

Sourc*: TradeStation

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56.00

54.00

52.00i

50.00

Trading n-Bar Rally

The example above illustrates an n-Bar Rally setup from the Chevron weekly chart. From January to March of 2005, Chevron's stock rose from $52 to $63. Chevron made a series of higher-high prices to complete n-Bar High pattern. At the beginning of April, 2005, Chevron stopped making new highs and presented a potential short setup.

1. Enter a "short" trade below the low of the last higher-high bar at $59.70.

2. Place a "stop" order above the high of the last n-Bar setup at $63.25.

3. Place the target from 62% to 100% of range of the n-Bar setup from $55 to $53.

Seven-Day Narrow Range &

Inside Bar & Opening Range Breakout (NR7ID with ORB)

_NR7ID with ORB _

Toby Crabel popularized a trading pattern called NR7ID with ORB in his book, Day Trading with Short Term Price Patterns and Opening Range Breakout.

7-Day Narrow Range (NR7): NR7 is defined as the daily range which is narrower than the prior 6-Day range.

Inside Day (ID): Inside Day is defined as a trading day that has range which is completely encompassed by the previous days' range. The prior day's high is higher than the current days' high and the prior day's low is lower than current days low.

Opening Range Breakout (ORB): Is a trade executed when prices trade a predetermined amount above or below the opening range. The predetermined range is calculated as the 10-bar average distance between open to high and open to low.

Trade: Enter a trade after the NR7ID in the direction of the breakout. Enter a long trade on breakout at the ORB value above the high. For a short trade, enter a short trade on breakdown at the ORB value below the Low.

Stop: For breakout trades, place a stop order at (low-ORB). For breakdown trades, place a stop order at (high + ORB).

Target: "NR7ID with ORB" is primarily a trade entry technique and the targets are set at prior "swing highs" and prior "swing lows" or at key resistance and support areas.

7-dav Narrow Range Day

7-dav Narrow Range Day

Toby Crabel Concept

Trading NR7ID with ORB

Trading NR7ID with ORB Pattern

The chart above illustrates a series of NR7ID patterns (shown in circles) from the Russell 2000 (ER2) 610 tick chart. An ORB is computed for a trade entry on the charts. Trades are only initiated in the direction of the breakdown or breakout above the high by ORB (at high + ORB), or below the low by ORB at (low - ORB). A stop order is placed in the opposite direction of the trade. As an example, for a breakout from NR7ID, a stop is placed at (low-ORB) and for a short trade, a stop is placed at (high + ORB).

Trading NR7ID

GOOG-Daily L=465.75 -1.06

Trading NR7ID with Previous Bar High/Low

490.00

485.00

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Day Trading NR7ID with Previous bar High/Lows

The chart above illustrates an example of a NR7ID pattern with previous bar highs/low trading from the GOOG daily chart. An efficient way to trade NR7ID bars is to use the previous bar high, or the previous bar low as the trigger points. Trade stops are placed on the other end of NR7ID against the trade. Usually these trades are very short-term and should be closed within 1-3 bars (days). In the chart above, on March 12th, GOOG formed a NR7ID pattern at A. A trade setup is to enter a long trade on the next day if the price trades 10 cents above the previous days high or enter a short if the price trades 10 cents below the previous days' low. Trades at B and D are long trades. Trades at C and E are short trades.

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Responses

  • Juuso Puurunen
    How to trade n bar rallies and declinea?
    7 months ago

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