Page 149 - THE MARKET WHISPERER

THE MARKET WHISPERER 14 7

the two dark candles, we can assume that from here on, the stock will go
up.

Has an uptrend been established yet? Absolutely not. We will wait. After
the first up trending candle are two dark “corrective” candles. These are
then followed by a new high, and we now have two higher highs. Now we
can see the trend. Now we await the trend correction, and buy on the first
reversal which appears at [1]. At this point the stock is showing the classic
reversal pattern with a long bottoming tail and is simply begging us to buy.
SHLD closes the day’s trading with a high of 4.4% above the open!

Summary:
One trade with the trend is worth a thousand failed intraday attempts

at finding the reversal pattern of a trendless stock.

SMART A reversal pattern should be looked for only within the
MONEY stock’s trend. In an up-trending stock, we will look for the
bullish pattern, and in a downward trending stock, we will
look for the bearish pattern

Later in the book, we will apply the more common name for these
pattern changes: reversals.
• A reversal that brings the stock back to trending up is called a roll-up
• A reversal that bring stock back to trending down is called a roll-over

Homework
Traders will often look at fifteen-minute candles in order to reduce the

influence of “noise” on their decisions. On a clean page, sketch a fifteen-
minute candle that replaces Sear’s first three 5-minute candles. Get the
picture?

When to Hit the Button

There is little point in learning patterns if you do not know when to hit the
button. In the chart below, I have marked the long and short entries in the
accepted reversal formations.