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Question 1

According to Al Brooks, how is a ‘climax’ primarily distinguished from a ‘breakout’?

Answer 1

A climax is a breakout that occurs late in a trend (after 20 or more bars), whereas a breakout occurs early in a trend.

Question 2

Every major reversal pattern, including a climax, most of the time involves a _____.

Answer 2

trading range

Question 3

What is the term for a breakout that occurs late in a trend and is followed by the trend either going sideways or reversing?

Answer 3

Climax.

Question 4

After a climax occurs, what are the approximate probabilities of a trend reversal versus a trend resumption?

Answer 4

There is a 50% chance of a trend reversal and a 50% chance of trend resumption.

Question 5

Most climaxes are only a single bar and lead to what type of reversal?

Answer 5

A minor reversal, such as a pullback in a trend or a leg in a trading range.

Question 6

In a buy climax, what psychological shift is occurring among bulls and bears?

Answer 6

Bears are giving up or being overwhelmed, while strong bulls become aggressive enough to buy at the high.

Question 7

A climax can be as brief as a single bar or last for many bars, such as in what type of channel pattern?

Answer 7

A micro channel.

Question 8

A gap between the close of a climactic bar and prior lows that subsequently closes is called an _____.

Answer 8

exhaustion gap

Question 9

When a climactic breakout fails and the gap closes, the breakout is referred to as what type of climax?

Answer 9

An exhaustive climax.

Question 10

If a strong breakout occurs late in a trend and the subsequent pullback does not close the gap, it may be a _____ leading to a measured move.

Answer 10

measuring gap

Question 11

After a sell climax reverses, what is the first price target for the reversal?

Answer 11

The start (high) of the sell climax.

Question 12

After a buy climax reverses, what is the first price target for the reversal?

Answer 12

The start (low) of the buy climax.

Question 13

What is the traditional definition of a climax?

Answer 13

A strong surge late in a trend followed by an abrupt, unexpected (low probability) reversal.

Question 14

An abrupt, sharp reversal at a top is often called a V-top or an _____ V.

Answer 14

inverted

Question 15

Any unsustainable move late in a trend, such as a very tight channel, is considered _____.

Answer 15

climactic

Question 16

How does a tight bull channel on a 5-minute chart often appear on a 60-minute chart?

Answer 16

As a strong breakout, like one or two big bull trend bars.

Question 17

A strong rally within a trading range is likely a _____ test of resistance at the top of the range.

Answer 17

buy vacuum

Question 18

A strong selloff within a trading range is likely a _____ test of support at the bottom of the range.

Answer 18

sell vacuum

Question 19

A series of consecutive buy climaxes often leads to what market state?

Answer 19

Exhaustion, followed by a trading range and sometimes an opposite trend.

Question 20

Why does Al Brooks rarely use the terms ‘V-top’ or ‘V-bottom’?

Answer 20

Because they are usually something else, like a wedge, parabolic wedge, or major trend reversal.

Question 21

Perfect V-tops and V-bottoms are extremely rare and usually only occur on smaller time frame charts due to what?

Answer 21

News events.

Question 22

A pattern that looks like a V-top can often be identified as a parabolic wedge with how many pushes?

Answer 22

Three pushes.

Question 23

For a pullback after a reversal to qualify as a lower high major trend reversal, it must retrace at least how much of the initial leg down?

Answer 23

At least one-third.

Question 24

What is the minimum expected outcome after a buy climax halts a trend?

Answer 24

A trading range lasting for several bars.

Question 25

An exceptionally strong bull bar late in a weak trend is called a _____ bar.

Answer 25

surprise

Question 26

Why do smart bulls take at least partial profits on a surprisingly big bull trend bar?

Answer 26

They don't want to risk the surprise gift quickly disappearing in a reversal.

Question 27

A buy climax is partially caused by weak bears _____ back their shorts as the market races up against them.

Answer 27

buying

Question 28

After taking profits on a big climactic bar, strong bulls will typically wait how long before considering buying again?

Answer 28

At least 5 to 10 bars, to see if bears can create a reversal.

Question 29

The market state of 'big down, big up' creates 'big confusion,' which is the hallmark of a _____.

Answer 29

trading range

Question 30

What is a micro double top?

Answer 30

Two nearby highs, not necessarily at the same price, that represent two failed attempts to go higher, often on a small scale.

Question 31

While many assume a climax leads to a trend reversal, what is the more common outcome?

Answer 31

The market goes sideways into a trading range.

Question 32

A climactic reversal, such as a sharp selloff that reverses up, is often simply a leg within a _____.

Answer 32

trading range

Question 33

A single, very big climactic bar that reverses immediately is often related to what?

Answer 33

A news event.

Question 34

Why is a micro channel considered climactic?

Answer 34

It is an unsustainable pattern that the market cannot continue forever.

Question 35

A failed breakout at the start of a trend is called a failed breakout, not a _____.

Answer 35

climax

Question 36

What is a 'negative gap'?

Answer 36

A situation where a pullback slightly overlaps the breakout point, which can sometimes still lead to a measured move.

Question 37

When you see the biggest trend bar of a trend occurring after 50 or 60 bars, is it more likely to be an exhaustion gap or a measuring gap?

Answer 37

It is more likely (60% chance) to be an exhaustion gap.

Question 38

A series of three or more climaxes in a very tight channel with little pullback often forms what pattern?

Answer 38

A parabolic wedge.

Question 39

A buy climax is considered to have ended when the next bar is either a _____ bar or a small bar.

Answer 39

bear

Question 40

What is the probability that a breakout above a bull channel will fail and reverse to test the bottom of the channel?

Answer 40

Approximately 75%.

Question 41

Because of the high probability of a breakout below its trendline, any bull channel can also be considered a _____.

Answer 41

bear flag

Question 42

Due to a 75% chance of a breakout above its trendline, every bear channel is considered a _____.

Answer 42

bull flag

Question 43

What is the acronym for the general rule to wait before buying after a significant reversal down from a series of buy climaxes?

Answer 43

TBTF (Ten Bars Two Legs).

Question 44

After a strong breakout above a bull channel, the market cycle starts over again, beginning with the breakout, followed by a channel, and then a _____.

Answer 44

trading range

Question 45

After a market goes sideways for 20 or more bars following a climax, what is the market said to be in?

Answer 45

Breakout mode.

Question 46

In breakout mode after 20-30 bars, the probability of trend resumption is approximately what?

Answer 46

50%, the same as the probability of a trend reversal.

Question 47

In a trading range, a double bottom bull flag is a buy signal, while a _____ is a sell signal for bears.

Answer 47

lower high major trend reversal

Question 48

What two 'magnets' can pull price up quickly in a buy vacuum?

Answer 48

A measured move target and the top of a channel.

Question 49

After a series of consecutive buy climaxes, the minimum objective for a correction is _____ bars and _____ legs sideways to down.

Answer 49

10, two

Question 50

What is a likely cause for up to 50% of the selling pressure during a severe sell climax?

Answer 50

Option selling firms hedging their short puts by selling the underlying asset.

Question 51

The measure of how fast the delta of an option is changing is known as _____.

Answer 51

gamma

Question 52

Hedging by option sellers means a series of sell climaxes is often far less _____ than it appears.

Answer 52

bearish

Question 53

Why do buy climaxes tend to be less severe or extreme than sell climaxes?

Answer 53

Option firms selling calls are under less pressure to hedge by buying, so they contribute less to the buying pressure.

Question 54

A bear breakout below a wedge bottom is a low probability event; if it occurs with good follow-through, what is the minimum expected price action?

Answer 54

At least a small second leg down.

Question 55

When a low probability breakout traps traders, what is the likely reaction on the first pullback?

Answer 55

Trapped traders will exit, and traders who missed the move will enter, often causing a second leg.

Question 56

The biggest sell climax occurring late in a bear trend is more likely an _____ end of the trend than a measuring gap.

Answer 56

exhaustive

Question 57

As a minimum guideline, a 50-bar bear trend would typically be followed by a corrective rally lasting at least how long before bears sell again?

Answer 57

Two legs and about 20 to 30 bars.

Question 58

A 13-bar bull microchannel is an example of _____ behavior that is usually climactic.

Answer 58

unsustainable

Question 59

A double top lower high within a tight trading range is also known as a double top lower high _____.

Answer 59

major trend reversal

Question 60

What is the probability of getting a swing trade (two legs down) after a double top lower high major trend reversal signal?

Answer 60

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