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Break Out from a Trading Range

Here are two ways to know when prices are getting ready to break out from a trading range. 

When prices are in a trading range, count the number of closes above or below a specific price near the vertical mid-level of the trading range. If 70% of the closes are above the mid-level price, and the market cannot rally and close above reaction highs, a severe correction may be imminent. If a market breaks and cannot close below reaction lows, then expect a rally to carry prices above the reaction highs. E.g. Let's assume that a futures chart is showing that about 90% of the Closes are above 445.00, yet prices cannot Close above 455.00. If prices finally do Close above 455.00, a strong buy signal would then be in place.

Another way to determine that prices are about to break out of a trading range is to note if you have a 1-2-3 followed by a Ross hook within the trading range. If both are present, the percentages favor a breakout to follow, and entry by way of a TTE is acceptable.

A 1-2-3 formation followed by a Ross hook is a consistent objective chart pattern for defining that a trend or swing is in process. Once the point of the Ross hook has been violated, this pattern is enough to establish that a trend or swing does exist.


Comments 1

Guest - susan patton on Saturday, 27 June 2020 15:03

Very INFORMATIVE. thank you

Very INFORMATIVE. thank you
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Friday, 23 February 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.