Emotion drives price.

And at the market open, STRONG emotion can drive price with strength.

Tuesday offered a perfect example, with a pre-market news-driven price shock resulting in a strong bearish trend day.

A day which screamed out to be traded on the short side.

But let’s back it up first and look at some basic pattern theory, with two variations of the same pattern. First, the Bullish Kicker Pattern.

<image:The Bullish and Bearish Kicker Patterns>

And now the Bearish Kicker Pattern. 

<image:The Bullish and Bearish Kicker Patterns> 

Let’s take it next level though. We’ll look at the Bearish variant of the pattern, as that’s what played out in the markets on Tuesday.

<image:The Bullish and Bearish Kicker Patterns>

Repeating for emphasis:

I want you to be a trader whose orderflow helps CREATE the second candle. Not a trader who waits and reacts only after it is complete.

<image:The Bullish and Bearish Kicker Patterns>

Think from the perspective of “other traders” rather than from a pattern perspective.

What are trader’s expectations at the close of the bullish green candle?

Accepting that we’re lacking wider context and are talking at the conceptual level only, we would assume they see (a) significant bullish strength creating a bullish trend day and (b) expectations for continuation higher.

And what do they get instead?

They don’t get what they hope to see; a strong bullish open gapping higher than the prior candle.

They don’t even get an open inside the green candle, with hope that once it does break the high then the sky is the limit.

No, instead the market shatters all hope and gaps down below the low.

Everyone holding a LONG position (or at least biased long)… is wrong.

Kicked in the guts! 

<image:The Bullish and Bearish Kicker Patterns>

<image:The Bullish and Bearish Kicker Patterns>

Let’s look at the market at the close on Monday, starting with the daily chart.

<image:The Bullish and Bearish Kicker Patterns>

The 30 minute chart…

<image:The Bullish and Bearish Kicker Patterns>

But then the CPI numbers came out.

Let’s look to the 30 minute chart again, this time at 0930. And showing the overnight action with a shaded background.

<image:The Bullish and Bearish Kicker Patterns>

Here is how I want you to consider playing this.

<image:The Bullish and Bearish Kicker Patterns>

<image:The Bullish and Bearish Kicker Patterns>

<image:The Bullish and Bearish Kicker Patterns>

<image:The Bullish and Bearish Kicker Patterns>

(1) Let the opening range develop. There is no hurry to act. Let any opening chop play out without you.

(2) Use the opening range as a simple tool for defining the market bias. Long above, short below.

(3) Within these long above / short below restrictions, you now simply follow your normal process (as described here).

Be the trader who creates the pattern. Not just a trader who reacts after it is complete.

Happy trading,

Lance Beggs

PS. You’ll find another reference to the Kicker Pattern here (although not a “textbook-perfect” example): https://yourtradingcoach.com/trading-process-and-strategy/kicked-in-the-guts/

 


 

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