Finding the top of a retracement after an evening star pattern is not as difficult as you might think but not super easy either. You have to look carefully.
The answer is to go to the KC chart.
On here drag the MACD down to its smallest size so that the price action fills your screen - maximum view.
On this chart you will have your Bolinger bands and Keltner channels (period 4, factor 1) and possibly also the Starc bands. The Starc and Keltner bands will follow each other closely.
For good colour contrast use blue or dark grey for the BB, orange for the Keltner and dark green for the Starc. Remember that you also have colours for the candles so therefore my colour suggestions as given.
Look at the 2 drawings of a KC chart below >>>
By
tymen1 at 2008-05-15
These diagrams show the basic principle on how to detect a retracement/pullback top. You do not have to enter at the exact top (you do well if you do) but close to the top is good.
The 2 diagrams show the blue Bolinger bands, orange Keltner upper and lower bands (middle band missing - irrelevant) and also the upper and lower Starc bands in green.
For good contrast and clarity for readers, I have filled the middle of the Keltner/Starc bands in grey.
The overall general direction of price action is shown by the pink arrow.
A candle is shown. It can be green or red, does not matter. Note that the wick or top penetrates the bands.
In the first diagram the Keltner/Starc bands are going up and the highest candle wick or top penetrates all three bands as shown. The
upper Bolinger is tagged or penetrated.
In the second diagram the Keltner/Starc bands are going down (it is subtle - look carefully!!) and the highest candle wick or top penetrates all three bands as shown. In this case the
middle Bolinger is tagged or penetrated.
IMPORTANT NOTE
On looking back thro this post I have discovered an
additional entry diagram. When the Keltner/Starc is going
down the highest candle wick/top may also tag/penetrate the
middle Keltner/Starc at the same time as the
middle Bolinger.
I will revise the diagrams next post to save confusion
To assist you in becoming competant with finding these pullback tops, the posts that follow will look at trades where this matter is dealt with in detail.