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24 Flashcards

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1
Q

According to Al Brooks, what is the broad definition of a wedge pattern?

A

It is any pattern that has three pushes, whether or not the lines are converging.

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2
Q

Wedges are always considered either a flag in a trend or as part of a _____.

A

reversal

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3
Q

What is a wedge bare flag?

A

A pullback in a bear trend that has a three-push pattern, suggesting the bear trend will resume.

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4
Q

What is a wedge top?

A

A reversal pattern at the end of a bull trend, characterized by three pushes up.

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5
Q

What is the approximate probability that a bull channel will have a bear breakout?

A

There is a 75% chance of a bear breakout, either by moving down or sideways into a trading range.

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6
Q

How does Al Brooks relate wedges to triangles?

A

A wedge is simply a triangle where the pattern is sloped upward or downward.

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7
Q

What is a nested wedge?

A

A smaller wedge pattern that forms within a larger wedge pattern.

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8
Q

A nested wedge has a _____ probability of leading to a reversal compared to a simple wedge.

A

higher

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9
Q

What is a higher high major trend reversal?

A

A type of wedge reversal where the market makes a new high and then reverses into a bear trend.

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10
Q

In a bull trend, a three-push pullback is known as a _____.

A

wedge bull flag

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11
Q

What is the minimum expected move after a wedge top reversal?

A

A swing down lasting at least 10 bars and containing two legs.

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12
Q

What is a ‘by the close’ rally within a wedge top?

A

A strong rally where traders buy at the market close, confident the market will go at least a little higher.

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13
Q

A small pullback bull trend, often found within a wedge, is also known as a _____ trend.

A

fomo (fear of missing out)

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14
Q

Why are FOMO trades considered ‘crowded trades’?

A

Too many traders are on the same side (long), buying based on momentum rather than value.

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15
Q

What typically happens when a crowded trade starts to reverse?

A

Everyone exits in a panic, causing a sharp reversal.

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16
Q

What key characteristic increases the chances of a successful reversal from a wedge bottom?

A

Overlap, where the pullback from the second leg goes above the low of the first leg.

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17
Q

A failed breakout below the bottom of a bear channel is a good sign for the _____.

A

bulls

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18
Q

What are two common price targets after a wedge bottom reversal?

A

A test of the top of the wedge channel and a move of at least 10 bars and two legs.

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19
Q

What psychological shift occurs in a wedge bottom?

A

Both bulls and bears decide the price has gone too far down and the fair price is higher.

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20
Q

What causes the ‘second leg up’ after a reversal from a wedge bottom?

A

Trapped-out bulls buying pullbacks and trapped-in bears buying to cover their shorts.

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21
Q

What is a ‘pain trade’ in the context of a wedge bottom forming in a bear trend?

A

A low probability event where a weak-looking trend continues for a long time, causing pain for counter-trend traders.

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22
Q

What is the probability of a breakout direction from a mostly horizontal triangle?

A

There is a 50% chance of an upside breakout and a 50% chance of a downside breakout.

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23
Q

The flatter a wedge pattern is, the more it behaves like a _____, with 50/50 breakout odds.

A

triangle

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24
Q

When a double bottom forms and a breakout below it occurs, this pattern creates _____ pushes down.

A

three

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25
Why can a wedge be difficult to identify in real-time?
Wedges are rarely perfect and most of them don't look like classic textbook examples.
26
Al Brooks suggests that most channels can be considered a type of _____.
wedge
27
When drawing a trend line for a wedge, it's common to connect the first and third points, even if the _____ point overshoots the line.
second
28
What does an 'undershoot' mean in the context of a wedge?
The third push does not quite reach the trend line connecting the prior pushes.
29
What is a 'truncated wedge'?
A variation of a wedge where the third push fails to go beyond the second push (e.g., a higher low in a wedge bottom).
30
What creates a truncated wedge bottom?
Bulls are so confident of a reversal that they buy ahead of the prior low, and bears take profits early.
31
A failed breakout above a double top is functionally a type of _____.
wedge top (with three pushes up)
32
A failed breakout below a double bottom is functionally a type of _____.
wedge bottom (with three pushes down)
33
Why is it a bad idea to buy a wedge bottom in a very tight bear channel?
A tight channel is a breakout on a higher time frame, and reversals are likely to be minor and become bear flags.
34
According to the 80% rule, what happens to most reversal attempts in a strong trend?
80% of them will fail and become flags, and the trend will resume.
35
What is a sign that a bear trend is too strong for a wedge bottom to reverse it?
The presence of open gaps, where the legs of the wedge do not overlap.
36
If you see a very strong breakout leg within what you thought was a three-push pattern, what should you do with your count?
You should restart the count, treating the new strong breakout as the first push of a new pattern.
37
For a wedge to be reliable, what kind of symmetry is generally desired between the pushes?
The spacing (in bars) between pushes 1 and 2 should be roughly similar to the spacing between pushes 2 and 3.
38
The transition from a bull trend to a bear trend often involves a period where the first leg of the _____ trend begins before the _____ trend has ended.
bear, bull
39
Even a single bar, such as a bear bar followed by a bull bar, can be considered a 'leg' in a _____.
wedge
40
It is often possible to see a wedge on a chart by inferring its presence on a _____ time frame, without actually looking at that chart.
smaller
41
What is a 'parabolic wedge'?
A wedge pattern where the slope increases with each push, representing a climactic, unsustainable move.
42
A parabolic wedge is a sign that the market has gone too far, too _____.
fast
43
After a parabolic buy climax, a pullback that continues for more than 20-30 bars is called an _____ and may convert into a bear trend.
endless pullback
44
What does a series of 'give up' bars represent after a potential parabolic climax?
Traders on the climax side (e.g., bulls in a buy climax) are finally liquidating their positions in a panic.
45
Why are parabolic wedges common on the market open?
The first hour often sees strong, unsustainable moves that form climaxes.
46
What is a '13 bar micro-channel' an example of?
An unsustainable, climactic move that is likely to see a correction.
47
A wedge that forms without extreme buying or selling (lacking big climax bars) is more likely to lead to a _____ than a full trend reversal.
trading range
48
What is a 'small pullback bear trend'?
A very tight bear channel where pullbacks last only a few bars and do not travel far, making wedge bottom buys very low probability.
49
When are wedge bottoms in a bear trend more likely to succeed?
When the bear channel broadens, the legs begin to overlap ('stairs'), and signs of buying pressure (bull bars) appear.
50
What is a 'higher low major trend reversal'?
A buy setup that occurs after a bear trend, a strong bull breakout, and then a pullback that forms a higher low than the trend's bottom.
51
What happens when a wedge pattern fails and breaks out in the 'wrong' direction (e.g., a bear breakout from a wedge bull flag)?
You should expect an accelerated trend in the direction of the breakout, often with two legs.
52
What is a common target after a failed wedge breakout?
A measured move based on the height of the wedge pattern.
53
A mostly horizontal wedge where a bull trend resumption attempt fails to break the top is known as a _____ of a small breakout pattern.
small breakout
54
What is the probability of a measured move down after a bear breakout from a 'small breakout of a small breakout' pattern?
Approximately 60%.
55
When the market breaks above an obvious stop location, like the top of a wedge, what are the two equally likely outcomes?
There's a 50% chance of a measured move up and a 50% chance the breakout will fail and reverse down.
56
A second attempt to reverse after the first attempt failed and broke the wedge's extreme is a _____ pattern.
common
57
What is the relationship between a bull channel and a bear flag?
Almost every bull channel can be considered a bear flag on a higher time frame chart.
58
What does it signify when the pullback from a wedge's second leg goes above the low of the first leg?
It signifies overlap and increasing buying pressure, strengthening the case for a reversal.
59
Why does a second leg often form after a trend reversal?
It is caused by trapped traders (both those who missed the entry and those on the wrong side) entering the market on the first pullback.
60
A bear flag is a small _____ or a small _____.
trading range, bull trend
61
If you are trading a very high time frame chart like a monthly chart, you might look at a _____ chart for an earlier entry on a wedge pattern.
smaller time frame (e.g., daily or 60-minute)
62
A 'sell vacuum test' often occurs as part of a climactic push in a parabolic wedge, testing the bottom of a _____.
trading range
63
In a strong trend, you should expect every reversal attempt to become a _____ and look to trade in the direction of the trend.
flag
64
An 'endless pullback' that lasts for many bars after a buy climax can often be the _____ of a new bear trend.
start
65
A failed breakout below a wedge bottom often leads to a second bottoming attempt, sometimes in the form of a _____
micro double bottom
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