Time Frame: Weekly and daily
- Start with the weekly chart
- Identify the most recent large bearish and bullish weekly candle bodies with bodies larger than the previous 2 or 3 weekly candle bodies. (the candle body is between the open and the close and not the high and the low). There will be one weekly bullish candle and one weekly bearish candle.
- Identify the 50% level of the candle body.
- For a bearish weekly candle place a rectangle from the high (yes the high) of the candle to the 50% level.
- For a bullish weekly candle place a rectangle from the low (yes the low) of the candle to the 50% level.
- After a long weekly candle closes we want to see price continue past then retrace back into the area of the rectangle.
- Once price comes back into the rectangle we look for a daily reversal signal on the daily chart within the rectangle for entries. I use Japanese candlestick theory as taught by Steve Nison and Greg Morris to identify reversal signals.
LBC= long bodied candle
BeLBC =Bearish long bodied candle
BuLBC = Bullish long bodied candle