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Reversal Bar Patterns Part 3: Buying and Selling Climaxes In parts one and two (linked) we covered the basics of reversal bar patterns including hooks, pipes, and keys. In this piece we focus on the buying and selling climax. In the final installment we will focus on upthrusts and springs. The patterns covered in this series represent an overt change in the balance of supply and demand. Importantly, very few patterns set up as they would in textbooks or in my examples, but the principles are consistent. Understanding why they occur and developing analysis and trading judgement around them is a primary skill. In this regard, there is no substitute for staring at thousands of bar and candle charts. One of the more important chart patterns is the buying and selling climax (BC & SC). Climaxes are exhaustion/capitulation patterns. A selling climax (SC) develops as weak handed buyers capitulate. Buying climaxes build as shorts capitulate and timid buyers who missed out on the rally are finally induced to enter. Selling climaxes are more about existing longs capitulating and selling. In general, the complete (perfect) pattern sequence consists of preliminary demand (PD) selling climax (SC), minor test (MT), automatic rally (AR) and secondary test (ST). Of the six, the minor test and preliminary demand are optional. For simplicity we will focus on the selling climax. Buying climaxes conditions are the direct opposite with the exception that they tend to occur on lower volume than selling climaxes. Climaxes typically occur in extremely extended markets that have trended a long while. The climax low is often made in conjunction with extremely bearish news flow, dismal sentiment, and a palatable bearishness. Put/Call ratios and other derivative measures are typically at extremes. I begin actively monitoring for the pattern when oscillators reach extreme readings or after a long period of trending behavior. I am more attentive on the second or third foray into oversold/overbought, particularly if there is a pronounced momentum divergence. The appearance of the climax strongly suggests that bad news has already been discounted. Trends are often defined by three successively steeper trendlines. The 3rd and final trendline is often parabolic and defines the terminal portion of a trend. I am particularly attentive for the pattern to develop after the third trendline develops. Climax structures are not created by strong handed/well informed buyers buying the weakness, but by over-levered and poorly placed longs capitulating and liquidating positions as their pain becomes too much to bear. The bearish news also lures in new weak handed/trading shorts, who, trapped by the sudden reversal, are forced to cover. The combination of the two clears the immediately available supply. Once the immediately available supply is cleared, there is not much resistance to the market advancing. In Wyckoff terms the initial rally from the selling climax low is labeled the automatic rally (AR). As the AR develops, shares are often distributed back from strong hands to weak hands. Since supply has been exhausted, the AR can often cover significant ground. Opportunistic short-term buyers of the selling climax often use this rally to sell a large portion of the position built during the climax. Remember that the buyers during the SC are not generally long-term investors but are more likely sophisticated agile traders. They often take advantage of the reaction rally to take trading profits. While climax behaviors often represent intermediate or long-term turning points, they can also represent shorter term exhaustion of the immediately available supply/trend. As the automatic rally develops new supply will emerge. Longs who resisted selling during the sharp decline to the climax lows, opportunistic traders who bought into the reversal behavior and new shorts all sell into this rally. Additionally, strong handed bearish fundamental traders may increase their line. This is why, for a climax to be trusted, there must be a secondary test (ST) that is well separated in time from the initial low. In the weeks and months that follow a weekly perspective SC, the market will test near the climax low. The successful completion of the test generally represents an all clear for longer term positions. The pattern is fractal. That is it shows in all time perspectives. The key is that the secondary test is well separated in time from the climax structure. Preliminary Demand: There is often a sharp rally just prior to the selling climax. Wyckoff labeled this as preliminary demand (PD), a point at which strong handed longs are beginning to accumulate shares in anticipation of a turn. The PD is an alert to begin monitoring for a selling climax. The PD rally should be noticeably stronger than the rallies that preceded it. Selling Climax: Climax patterns are typified by extremely heavy volume, much wider than normal price spreads and typically feature a clear reversal pattern (often a key reversal) bar or bars. There is generally an acceleration of the trend, with wider price spreads and a steeper angle of decline. At one time climaxes were mostly single bar affairs, but now the climax structure often builds over several trading days. Minor Test: In the hours and days after the automatic rally begins, the market will often suffer a setback toward the SC. The appearance of demand on this setback solidifies the odds that the AR rally will cover reasonable ground. In many cases the minor test will only appear on intraday charts. Automatic Rally: In the days following the SC the market will rally sharply. Volume is typically very strong near the beginning and tails off as the rally progresses. The AR often has a noticeably different character than prior corrections in the downtrend in that they cover more ground and volume is better. Distance traveled is important, the greater the reaction after the climax the more significant its implications. Small ARs are not to be trusted. Secondary Test: Selling climaxes clear out the immediately available supply in that price zone. Even short-term climaxes can stall the market for a period of time (think trading range). But they can fail, and when they fail rapidly it is a solid indication of a continuing bear market. This is why climax structures MUST BE SUCCESSFULLY TESTED before they represent anything other than short term capitulation. The test should be well separated in time, and occur on generally lower volume. Selling should be far less intense than on the initial decline. This is demonstrated by the general decline in volume and the angle of the testing decline. In other words, the angle of the decline to test should be significantly less than the angle of the original decline. I prefer to see them play out over several weeks (assuming a daily perspective outlook). Trading Range: Often the test will take the form of a trading range during which strong hands, usually large institutions, accumulate new long positions. In future installments we will cover the analysis of trading ranges. At times the market will make a V bottom with no test. In that case, when the new trend becomes unmistakable, you should begin utilizing traditional trend-based entries into positions. To Repeat: The huge volume and the reversal bar offer a warning that things may be changing. But, without the completed test, a trend reversal is only conjecture. YOU MUST HAVE A COMPLETED TEST before deciding that a low of any consequence has been made. Climaxes are fractal. They appear in literally every time frame. But the larger the time perspective, the more important the climax. It is also worth noting that the notes around sentiment are not particularly meaningful when working in time frame shorter than daily. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
ICEUS:DX1!Education
by CMT_Association
3
7 Dimension analysis for DXY 7 Dimension analysis 🟢 Analysis time frame: Daily 1: Price Structure: The market is currently exhibiting a bearish price structure with a corrective move. An inducement has already taken place, and the first order block (OB) is formed along with a gap and window area. There is also a supply area at the window. 2: Pattern: Various chart patterns are observed: Trend lines acting as perfect resistance. A rising wedge pattern with a downside breakout move already completed, leading to the start of a correction. A flag pattern formation. A double bottom breakout with heavy volume. A CIP (Change in polarity) expected at the gap. Candle patterns are as follows: Doji candle at the bottom, indicating a potential reversal. A record low session count of just 4 bullish candles, further supporting the reversal expectation. 3: Volume: Good volume is observed at the bottom, supporting the potential for a reversal. 4: Momentum UNCONVENTIONAL Rsi: The Unconventional RSI is currently in the bearish zone but showing correction momentum. 5: Volatility measure Bollinger bands: Volatility recently finished walking on the band, and the move is now resisting at the mid band, indicating a significant resistance area. 6: Strength ADX: Bears are currently in strength according to the ADX indicator. 7: Sentiment ROC: The market is in a corrective phase, and the USD is strong during this correction. ✔️ Entry Time Frame: H1 ✅ Entry TF Structure: Bullish ☑️ Entry Move: Impulsive ✔ Support Resistance Base: Swing Order Block (OB) support ➕ FIB: Waiting for confirmation Trend Line: Waiting for a breakout when the price touches the support level. ☑️ Final comments: Consider buying at the dip. 💡 Decision: Wait until price takes liquidity from the bottom. 🚀 Entry: 100.57 ✋ Stop Loss: 100.425 🎯 Take Profit: 101.270 😊 Risk to Reward Ratio: 1:5 🕛 Expected Duration: 2 days.
ICEUS:DX1!Long
by Optimum369
✨ NEW: DX1! ✨ INTRADAY ✨BSO @ 100.25 SLO @ 100.00 SSO @ 99.83 TP @ 96.00 TECHNICAL ANALYSIS According to my analysis of the 15-minute time frame for the US Dollar Index Futures from ICEUS, Price Action has been bullish. The price has been trading between the 99.22 and 100.25 levels since yesterday's USD News. The moving averages are all sloping downward, which suggests that the overall trend is bearish. However, the stochastic oscillator is starting to turn up, which could signal a potential reversal. The next key level to watch is the 99.42 level. If the price breaks below this level, it could open the door for a further decline towards the next Major Support Level @ 96.000. However, if the price is able to hold @ 100.00, it could signal a the continuation of a DT. Overall, the market is currently in a state of flux. The overall trend is bearish, but there are some signs that a return to the DT could be in the works.
ICEUS:DX1!
by ProfessorCEWard
US Dollar Index is looking negative ahead of CPIWatch the April low at 100.42. Disclaimer: The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.
ICEUS:DX1!Short
by The_STA
Is USD preparing to EXPLODE upwards?USD falls when there is an abundance of dollars, and rises when there is a shortage. It is an empirical fact that the world has been structurally short dollars since 2011 (really, since the GFC). And the conditions for this trend haven't changed yet. Debt-to-GDP ratios keep increasing, credit impulses are waning, and the rate of productivity growth is stagnating. The upward pressures on dollar funding continues on. The question is whether or not the dollar's fall since September 2022 is over. And there are early signs it has. We're ostensibly at the bottom of the new USD range. Generally, it appears to take about 90 days for TVC:DXY to get back to the top of the range. Which would put us at a +12% gain by summer 2024. Riding a dollar bullrun for the next year can be lucrative. Not to mention all the other correlation trades that come into play.
ICEUS:DX1!Long
by sacredprofit
THE USD TO DROP ATLEAST ANOTHER 15% BY LATE 2024The image presented shows our Elliott wave analysis on the price of the US Dollar index futures contract. We have reason to believe that we completed a 5 wave advance off of the 2008 low into the 2022 high to form primary wave one. Notice how nicely the impulsive advance is channeled utilizing the parallel channel tool in trading view. This redefines the trend as up (unless its a C wave of a running flat correction ) which means that the USDX started a cycle degree advance from the 2008 lows. We also have reason to believe that we are currently in the wave 2/B correction that started in late September 2022. The correction spoken off still has lower to go probably to the 61.8% Fibonacci retracement presented on the chart. From a time cycle perspective, we are convinced that we have most likely seen the high of the nominal 54-month wave which would be confirmed by the break of the 18-month valid trendline presented on the chart (red uptrend line of recent price action). Once we get this confirmation we can rest assured that the USDX is on its way lower to 90 or below which means another 15% decline before this market stages a healthy recovery in 2025 basis our time cycle analysis! Manage your risks accordingly Ahmed Farghaly
ICEUS:DX1!Short
by CyclicVibrations
USD is now bullishThe USD has given a couple of bullish signals and these are: 1. A higher high and breakout close of the highest close in the last 10 candles; 2. the MACD is turning up, crossed up the signal line too; 3. the VolDiv is beginning to turn upward and significantly turned up (white dot trigger); 4. The higher high and higher low pattern to bottom out of a downtrend had just happened, although a bit later than projected (points 1 to 5). Look forward to a higher high surpassing 106.62 and its a clear bull primary trend. 105.62 is the upside target. Then possibly 101 the downside target. Heads up! ps. There is something about the spike in the USD... a combination of Powell talk and the Feds raising interest rates, with a equity market panic attack. Note the imminent latter. This also affects a lot of other plays, Gold and Crude oil, for example. Crypto may be affected but Bond rates and prices definitely!
ICEUS:DX1!
by Auguraltrader
20 Reasons For Sell DXY 🔆MULTI-TIME FRAME TOP-DOWN ANALYSIS OVERVIEW☀️ 1:✨Eagle eye: The 12-month timeframe shows a clear bearish structure with the formation of a 3rd higher low (HL), indicating a continuation of the bearish move. The overall big picture is not favorable for the dollar. Last year, there was a large wick candle with a tap of the ultimate high order block. 2:📆Monthly: Currently, there is a clear bullish trend, but there is a visible consolidation (choch) on the monthly timeframe. A high volume candle at the top is followed by an inside doji and a fall in price. The price has been consolidating for the past 5 months, but there is potential for further downside towards the recent order block around 98.00, which can be a profit booking area. 3:📅Weekly: The price has confirmed a valid high and formed an internal consolidation (choch), but the low is yet to be confirmed. Based on the bigger picture, we anticipate further downside moves until the 100 area. We should hold our sell positions until the price taps the order block area at 100. A corrective move is expected once it reaches that level. 4:🕛Daily: The daily timeframe shows a bearish structure with potential for further lows. The last low is still protected, but given the bearish trend, there is a high chance that bears can push the price towards the 100 level during the current impulsive move. 😇7 Dimension analysis 🟢 analysis time frame: Daily 5: 1 Price Structure: Bearish 6: 2 Pattern Candle Chart: A window (gap) is present, which can act as a Continuation In Pattern (CIP). Additionally, a descending triangle is putting downward pressure on the price. 7: 3 Volume: Volume increases during bearish moves, indicating more selling pressure. Until the market gives a clear signal, it is not advisable to consider buying at any level. 8: 4 Momentum UNCONVENTIONAL Rsi: The market has lost momentum, but it is not yet strongly in favor of the bears. A strong rejection at the window area or resistance at the 60 level is needed for price confirmation. 9: 5 Volatility measure Bollinger bands: After a big volatile move, the price needs to calm down and may enter a period of consolidation or make a minor correction towards the 20-day moving average before continuing its downside move towards the target. 10: 6 Strength ADX: The ADX indicates a sideways trend at this point. 11: 7 Sentiment ROC: There is no strength in the sentiment ROC. ✔️ Entry Time Frame: H1 12: Entry TF Structure: After a strong bearish trend, there is a consolidation (choch) pattern forming. Upon closer observation, the daily window, extreme order block, and structure high coincide at the same point, making it a strong supply area or rejection point. We will place a sell order when a strong signal is formed. 13: Entry Move: The entry move must be impulsive. 14: Support Resistance Base: Daily window, extreme order block, structure high. 15: FIB: Trigger event done based on H1 timeframe. ☑️ Final comments: Open sell entries at the market opening, and if the price goes further up near the window, consider a second sell entry. A third sell entry can be placed if the market creates an internal Breakout-Sell (BOS) signal. 16: 💡Decision: Sell 17: 🚀Entry: Sell between 102.885 and 102.2 18: ✋Stop Loss: 103.175 19: 🎯Take Profit: 1st target at 100.5, 2nd target at 99.5 20: 😊Risk to Reward Ratio: 1:4 🕛 Expected Duration: 10 days
ICEUS:DX1!Short
by Optimum369