By: John Crane, swing trading guru
The “Tell” I am referring to is called the “counter-close”. The counter-close is a price bar where the closing price is in the opposite direction of the previous close. In other words, if the futures market were trending higher, a counter-close would close lower than the opening price. If the futures market were trending lower, the closing price would be higher than the opening price.
On the daily chart, a one-day counter close is not enough to confirm a Reaction swing and set up an entry signal, but a 60-minute chart may reveal a nicely formed Reaction swing and offer a potential signal that is hidden from view on the daily price chart.
A counter-close can appear anywhere in a trend, but there are only two places I look for the “Tell” and that is after a major high or low reversal and near the 20-day SMA after a TR pattern or Swing Trading Strategy TC pattern. In Figure # 9.1 I have you can see what a counter-close looks like in a downward trending futures market and an upward trending futures market. The following chart examples will better illustrate how to find the counter-close and the hidden Reaction swing and how it can be incorporated into your trading strategy.
Figure # 9.1 – One-day Counter-Close
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