Phase A

Phase A, represent the Stop of previous trend.
In general sense Phase A, will provide sign that the market is shifting/transitioning from trending to ranging.
  • A trader is not supposed to look for trade opportunities in Phase A. Rather, just observe the market in this phase.
  • Phase A is a good place to book profit from any previously open trades, (if any).
It is composed by first four logical events.
  • Preliminary stop
  • Climax
  • Reaction
  • Secondary test

Preliminary Stop

It will provide the first indication that the well informed traders have entered in the opposite direction of the trend.

Climax

The climax will create one of the boundaries of ranges.

Reaction

The reaction will provide further indication that there is greater interest to the counter trend direction.

Secondary Test

And opposite boundaries of the range in the secondary test will finish the Phase A.

3 Signs of Incorrect Identification:

  • Look for the sign of climatic volume in preliminary stop and the climax, that's the footprint of the well informed traders.
  • The reaction event will be qualitatively different than the prior counter trend waves.
  • What ultimately confirms the Phase A is the Phase B.
Note: So the traders must wait for the development of Phase B before looking for the trade opportunity, even the first 4 logical events appear to provide a trade setup.
Important: You might be looking for a trade after the end of the reaction, aiming for the secondary test to the climax, even though that is possible. But it is not, what method suggest us.
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