According to Al Brooks, why do traders usually not talk about rounded tops and bottoms?
Because these patterns are almost always something else, and traders prefer to use the other, more specific terms.
What type of market structure is a rounded top or a rounded bottom fundamentally?
It is a trading range.
In a trading range that forms after a bull trend, what is the probability of trend resumption versus trend reversal?
There is a 50% chance of trend resumption up and a 50% chance of trend reversal down.
What is the historical term traders used for a rounded top, representing strong bulls selling their positions?
Distribution.
Instead of a ‘rounded top’, Al Brooks would view a trading range after a bull trend as a potential _____.
lower high major trend reversal
A pattern with three pushes up followed by reversals down within a trading range can be identified as a _____.
triangle
What is the key takeaway about naming patterns like rounded tops, triangles, or head and shoulders tops?
The name is not important; what matters is understanding that the market is balanced and in breakout mode.
What is one way to trade a pattern that could be called a rounded top?
Sell the lower high major trend reversal or sell a breakout below a Head and Shoulders top pattern.
A pullback in a bear trend that continues to grow for many bars, tilting up instead of going sideways, can be considered a type of _____.
rounded bottom
What term does Al Brooks prefer for a pullback that keeps growing in a trend, eventually becoming a 50/50 situation?
An endless pullback.
At what point does a pullback in a bear trend stop being a bear flag and start being considered a small pullback bull trend?
When more and more bars are added, and consensus builds that the market is now in a bull trend.
What market action signifies that bears are ‘giving up’ and consensus is forming for a bull trend from a rounded bottom?
The appearance of several consecutive strong bull bars closing on their highs.
A very tight bull channel forming out of a bear trend is dangerous for bears because it is likely a _____ on a higher time frame chart.
breakout
If a pattern that formed a rounded bottom had broken to the downside instead, what would it have been called?
A bear flag.
A pullback in a bull trend is considered an ‘endless pullback’ once it grows to how many bars?
10 or 20 bars, or more.
When a pullback becomes an ‘endless pullback’, what happens to the probability of trend resumption?
It falls to about 50%, the same as the probability of a trend reversal.
What is the signal that everyone has agreed a bull trend’s endless pullback has reversed into a bear trend?
Consecutive big bear bars closing on their lows.
A _____ is a pattern with three or four pushes up that often leads to a pullback of 10 or more bars, creating a 50/50 breakout mode scenario.
parabolic wedge top
After a strong bear breakout from a trading range, what is the likely minimum target for the downward move?
A measured move down, often based on the height of the trading range.
What alternative name can be given to a rounded top that forms a lower high and then has a small pullback before breaking down?
An inverted cup and handle pattern.
When a pullback in a bull trend grows to 20 or more bars, Al Brooks stops calling it a pullback and instead calls it a _____.
trading range
In a trading range formed from an endless pullback, what action do bears who shorted take when the market breaks out to the upside?
They buy back their shorts to cover their positions.
A big bull breakout bar after a trading range indicates that _____ and _____ are both buying.
bears (to cover shorts); bulls
Besides a rounded bottom, what are three other terms for a reversal pattern at a low?
Higher low major trend reversal, head and shoulders bottom, or a wedge bottom.
