I asked a question of our readers in Part 1 of The One Word That Makes Markets Move. The question was what word?
The answer was “failure.”
A higher low is formed by a failure to break the prior low.
A lower high is formed by a failure to break the former high.
A double or triple top or bottom is formed by a failure to break a chart level.
This is further illustrated in my article, Why Retracements Work and How to Use Them in Your Trading where I pointed out 2 steps:
The first step is to understand why retracements work.
The next step is to find a way how to use retracements in your trading.
In Part 2, I created a video to further illustrate the point by pointing out when in a mature trend, a failed retracement is often needed before there can be a fresh run at a new high (or low). The same logic Can be applied to an intra-day trend but I will save that for Part 3.
Here is a question looking ahead.
Can US stocks continue to march higher or do they need a retracement to shake out weak longs and then a failure to setup a new leg up. Just something to keep an eye out for in the runup to the US elections.
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