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CLEAR AIR
 

Traders turn profits by anticipating price movement. Although this sounds simple, many market participants don't understand how to locate impending change. Stock prices move back and forth endlessly. But when do these common swings represent good trades and when are they just dangerous noise? One answer lies in the relationship between price and time.

The singular goal of trading can be defined as locating price expansion just before it happens and taking a position to capitalize on the event. When price moves a greater distance over a lesser period of time, individual chart bars and candlesticks expand in length. This range expansion signals those points of greatest opportunity for traders and investors.

Clear Air identifies horizontal chart levels where prior stock trends exhibited sharp price expansion in either direction. The stronger the CA event, the more likely that price will trigger volatility on the next pass. This tendency allows traders to locate outstanding trades with little more than quick visual scans of their favorite stock charts. CA prediction is simple: the more often those bars expand through the same levels, the more likely expansion will continue.

Congestion limits volatility. Range expansion represents the state of least congestion and greatest volatility. However, it cautions traders to manage risk closely as opportunity and danger stand side by side. Although price may have sharp momentum in one direction, defense trading must be exercised. Clear Air space can produce violent reversals.

Predicting natural swing points in pre-existing Clear Air utilizes only known support/resistance and fibonacci retracement levels. Since traders tap detailed price and volume from prior passages, those points can be used for cross-verification to reduce risk. High probability setups can be easily identified with natural entry and exit triggers.

Clear Air exists at new highs and lows as well as prior price breaks and trends. But locating safe positions in this Clear Air requires detailed fibonacci projections and may lead to conflicting outcomes. Only disciplined traders should play on this dangerous field. Major breakouts and breakdowns often print few congestion and swing points that traders can use to identify support/resistance. And positions must be taken without the benefit of information from prior passages through the same price levels.

 
Fibonacci and Clear Air
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Apply a fibonacci grid after a Clear Air series to reveal hidden reversal zones not apparent during the event. Try placing a grid over new sharp expansion moves to anticipate where opportunities will emerge on next retracement swing. When trading Clear Air, always rely on the chart in the next smaller time frame to locate low risk entry and exit levels.
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All original materials: © 2005 Brooke Publishers, Inc.
Comments: trader@hardrightedge.com