futures.

io October 30, 2018

Patterns on
the Open
Al Brooks
How to Trade Price Action
Brooks Trading Course
BrooksTradingCourse.com BrooksPriceAction.com
Main Points
Slide
▪ Trends From The Open: 20% of days 2
▪ 80% of days have reversal on open (1st 90 min) 6
▪ How to enter, place stop, and exit 9
▪ 4 Patterns: Gap down, Buy Climax 15
▪ Gap down, Buy Climax, but fails (bull BO) 18
▪ Gap down, Sell Climax 20
▪ Gap down, Sell Climax, but fails (bear BO) 34

BrooksTradingCourse.com BrooksPriceAction.com Slide 1

 Gap
GapDown
Downand
and
Bull st
Bull Trend From The 1 Bar
Trend from the 1 st Bar
Gap Down: Bull Trend From The Open

Today, only talking about “Gap Down” opens

This is an open below yesterday’s close
or below the 20 bar EMA Exit
Gap up is opposite
Only 20% of days trend up or down
all day from the open
(about once a week)
5/4/18

As long as bull trend,

B above bull bar closing near its H

Failed BO below yesterday’s TR

B above bull bar closing near its H
Trend From The Open Bull Trend

BrooksTradingCourse.com BrooksPriceAction.com Slide 3

 Gap
GapDown
Downand
and
st
Bear Trend From The 1 Bar
Bull Trend from the 1 st Bar
Sell Climax: Usually Bad Follow-Through Next Day
Gap down
Trend from the Open bear trend
Sell The Close, bear Micro Channel
1st 2 bars are bear bars, 2nd bar closing near L
Both have good size bodies
Sell the close of 2nd bar or below 2nd bar
As long as strong bear trend,
sell below bear bars closing near their L
9/25/14

By close of 2nd bar closing near L,

60% chance of MM down from open of 1st bar
to close of final bar of bear BO
BrooksTradingCourse.com BrooksPriceAction.com Slide 5
80% ofGap Down
Opens and
Have Reversals
st
Bull Trend from the 1 Bar
BO on Open: 50% Reverse, No Matter How Strong

Market looks for direction early in day Test of support or resistance can be very strong
Tries one way, but even strong BO fails Still will reverse 50% of time
50% of time

Strong selloff on open Strong rally on open

Became low of day Became high of day

BrooksTradingCourse.com BrooksPriceAction.com Slide 7

Opening Reversal: Early Reversal at Support or Resistance

80% of days test support or Trend From The Open lasting all day Wedge Bear Flag at EMA
Only 20% of days Then, Double Top (DT)
resistance in 1st 90 minutes
Reversal often becomes
high or low of day
Often also some other pattern
Call it an Opening Reversal

Parabolic Wedge Top above last week’s high Wedge Bottom below yesterday’s low Double Bottom (DB) Bull Flag at EMA and
yesterday’s close

Reversal is usually
Double Top, Double Bottom,
Wedge Top, or Wedge Bottom

BrooksTradingCourse.com BrooksPriceAction.com Slide 8

 How Gap DownPlace
To Enter, and Stop,
and Exit st
Bull Trend from the 1 Bar
Wait for Strong Signal Bar, Use Appropriate Protective Stop
Traders should enter most trades using stop orders
To increase the probability of a profit, wait for a strong signal bar
When selling, wait to sell below a bear bar closing near its low

5/21/18

When buying, wait for a bull bar closing near its high and buy above that bar,
not simply above the 1st bar with a bull body
BrooksTradingCourse.com BrooksPriceAction.com Slide 10
Wait for Strong Signal Bar, Use Appropriate Protective Stop
Put the protective stop just beyond the reversal
For example, if the buy signal bar is the low, put stop below that bar

5/21/18

Stop
If the buy signal bar is the 2nd or even the 5th or 6th bar of a multi bar reversal
and the 1st bar has a Lower Low, put the stop below the lowest bar
BrooksTradingCourse.com BrooksPriceAction.com Slide 11
Wait for Strong Signal Bar, Use Appropriate Protective Stop
Stop
S below bear bar closing on or near its L (often many good choices)
Initial protective stop above top of reversal
Stop or above major LH, no matter which entry you take

Stop

5/21/18
B above bull bar closing on or near its H
Stop (often many good choices)
Initial protective stop below bottom of reversal, or below
major Higher Low (HL), no matter which entry you take
BrooksTradingCourse.com BrooksPriceAction.com Slide 12
Wait for Strong Signal Bar, Use Appropriate Protective Stop
Stop Beginning traders should only be looking for swing trades,
and they should mostly swing trade
Stop That means that they will typically take 1 – 3 trades a day

Stop

5/21/18

Stop
Once they are consistently profitable, they can take 3 – 10 trades a day,
and they can add some scalps if they would like
BrooksTradingCourse.com BrooksPriceAction.com Slide 13
Wait for Strong Signal Bar, Use Appropriate Protective Stop
Stop
With that in mind, I created a classification of patterns for swing traders
4 versions of each: buy, sell, failed buy, failed sell
Stop About 100 basic patterns x 4 = 400 total sections

Stop

5/21/18

Stop
If a trader recognizes what the market is doing,
he can look at the examples of that pattern to get an idea of what might follow
BrooksTradingCourse.com BrooksPriceAction.com Slide 14
 Gap Down
Gap Downand
Bull st
andTrend
Rally from the Climax
to a Buy 1 Bar
Buy Climax: Any Strong Open Reverses 50% of Time
2nd Leg Bull Trap and Micro Double Top (DT)
2
No bear bar in 1st 9 bars
8/31/18
Strong Buying Pressure so bear trend unlikely
Either bull trend or TR day
1 Selloff became bear leg in TR day

No matter how strong an opening trend is,

it will reverse 50% of the time

BrooksTradingCourse.com BrooksPriceAction.com Slide 16

Buy Climax on Open: Failed BO above Yesterday’s High
2

1
Buy Climax on open
Yesterday’s H
Failed BO above yesterday’s high
Wedge from yesterday
Low 2
S below bear bar closing near its L

8/23/18

Despite strong selloff,

there were many early big bull bars closing near their highs
TR more likely than big bear trend
Bears take profits above bull bars and bulls start to buy
BrooksTradingCourse.com BrooksPriceAction.com Slide 17
 Gap Down
Gap Down and
and Rally to a Buy Climax,
st
Bull Trend from the 1 Bar
but Became Bull Flag
Gap Down: Bull Trend From The Open

No matter how strong an opening trend is,

it will reverse 50% of the time
Then, 50% chance trend will resume!

Failed Reversal down at MA

became bull flag
8/2/18

Became bull flag

B above bull bar closing on its H
Yesterday’s L
8 consecutive bull bars on the open is rare
Strong Buying Pressure
B above bull bars closing near their highs
Big gap down
Bull trend from the open
B above bull bar closing near its H
BrooksTradingCourse.com BrooksPriceAction.com Slide 19
 Gap Down
Gap Down andClimax,
and Sell
Bull Trend from the Upst
1 Bar
Then Reversed
Sell Climax: Reversal Day after ii (Consecutive Inside Bars)

Open

Exit

Yesterday’s L

Bull Reversal Day

HL MTR Bear trend, then bull trend
Reversal day usually does not close far above open
if initial selloff was strong
Sell Climax It is type of TR day
Opening Reversal up
11/2/17
ii B signal bars
BrooksTradingCourse.com BrooksPriceAction.com Slide 21
Sell Climax: Reversal Up after Micro Double Bottom (DB)
Exit

11/15/17

B 2nd failed BO
below yesterday’s low

BrooksTradingCourse.com BrooksPriceAction.com Slide 22

Sell Climax: Reversal Up after 2nd Leg Bear Trap
Parabolic Wedge
Exit long, bears S

1
B HL MTR
Micro DB

Strong B signal bar

B 2nd failed BO below yesterday’s low
2nd Leg Bear Trap
2 11/14/17

Last week’s L
S vacuum test of last week’s low

BrooksTradingCourse.com BrooksPriceAction.com Slide 23

Sell Climax: Failed BO below Yesterday’s Low
4 big bear bars, but shrinking bodies
Selloff losing momentum

9/4/18

Yesterday’s L

Failed BO below yesterday’s low

B above bull bar closing near its H

BrooksTradingCourse.com BrooksPriceAction.com Slide 24

Sell Climax: Reversal Up from Parabolic Wedge Bottom

B above bull bar closing near its H

But, strong early selling so minor reversal up
and not likely to reach H of day

9/6/18
Exit

LL MTR
3 bottom attempts so consecutive bottoms
Parabolic Wedge Sell Climax (tight channel with at least 3 legs)
BrooksTradingCourse.com BrooksPriceAction.com Slide 25
Parabolic Wedge Sell Climax: Micro Double Bottom

Micro DB
9/5/18
B above bull bar closing near its H

2
Parabolic Wedge Sell Climax
Sell vacuum test of bottom of gap on daily chart
Bottom of gap 3 Reversed up from 1 tick above
on daily chart
Big 3rd leg down so wait for Micro DB before buying

BrooksTradingCourse.com BrooksPriceAction.com Slide 26

Trend From The Open Bear Trend: Sell Climax
Trend From The Open Bear Trend
Became TR DAY

1/30/18
HL MTR

Micro DB, Parabolic Wedge

B above neck line of Micro DB or above outside up bar
BrooksTradingCourse.com BrooksPriceAction.com Slide 27
Gap Down: Sell Climax

5/3/18
Higher probability to B above bull bar
that closes near its H
Gap down
Wedge Bottom
B reversal up
BrooksTradingCourse.com BrooksPriceAction.com Slide 28
Big Gap Down: Trend From The Open Bear Trend
4 big bear bars closing near L
Trapped bulls in and bears out
Both will S 1st reversal up
At least small 2nd Leg Down likely

Failed BO below yesterday’s L,

Micro DB and LL DB
1 2nd entry B
5/11/17
2 B reversal up above bull bar closing on H

BrooksTradingCourse.com BrooksPriceAction.com Slide 29

Big Gap Down: Sell Climax and Wedge Bottom

Big gap down and

Bear Trend From The Open
Consecutive Sell Climaxes

8/15/18

Failed BO below Wedge Bottom, became bigger Wedge

B above bull bar closing near its H
BrooksTradingCourse.com BrooksPriceAction.com Slide 30
Gap Down: Sell Climax

Big reversal up
Dominant feature of day
so sideways to up likely

1
6/15/18

Sell Climax and strong reversal up

Possible bull reversal or 2nd Leg Bear Trap in TR day
2 B above bull bar closing near its H

BrooksTradingCourse.com BrooksPriceAction.com Slide 31

Gap Down: Consecutive Sell Climaxes

6/21/18

Strong selloff, but Consecutive Sell Climaxes

Failed BO below Parabolic Wedge Bottom
B above bull bar closing near its H
BrooksTradingCourse.com BrooksPriceAction.com Slide 32
Failed BO Low of Yesterday: 2nd Reversal Up

Opening Reversal Down at MA

Wedge Bear Flag

Failed BO below yesterday’s L,

2nd entry B so DB
B reversal up above bull bar
7/18/17
LL MTR (every MTR is a DB)

BrooksTradingCourse.com BrooksPriceAction.com Slide 33

 Gap Down
Gap Down andClimax,
and Sell
BullThen
TrendBear st
fromResumed
the 1 Bar
Gap Down: Sell Climaxes, but Continued Lower
Gap down and consecutive Sell Climaxes
1st leg up is likely Minor Reversal
S again below bear bar closing near its L

Most patterns work 40 – 60% of time

That means they fail 40 – 60% of time!

Parabolic
Wedge

6/25/18

Consecutive Wedge Bottoms

B above strong B signal bar

BrooksTradingCourse.com BrooksPriceAction.com Slide 35

Main Points
Slide
▪ Trends From The Open: 20% of days 2
▪ 80% of days have reversal on open (1st 90 min) 6
▪ How to enter, place stop, and exit 9
▪ 4 Patterns: Gap down, Buy Climax 15
▪ Gap down, Buy Climax, but fails (bull BO) 18
▪ Gap down, Sell Climax 20
▪ Gap down, Sell Climax, but fails (bear BO) 34

BrooksTradingCourse.com BrooksPriceAction.com Slide 36

 futures.io October 30, 2018

Patterns on
the Open
Al Brooks
How to Trade Price Action
Brooks Trading Course
BrooksTradingCourse.com BrooksPriceAction.com