20121126
Long 2 NQ 2627.0, 2627.0, +2.0, +4.5
Long 1 TF 806.4, -0.5
Short 2 NQ 2638.0, 2638.0, +2.0, -0.0
Long 1 NQ 2633.5, -1.0
Long 1 TF 804.0, -0.2
Long 2 TF 803.8, 803.8, +0.5, +1.0
Long 2 NQ 2631.75, 2631.75, +2.0, +5.0
Total NQ +12.5
Total TF +0.8
Breakouts should be part of a trade plan. Some of the most profitable trades come from them. But only the best breakout choices produce profits, as the rest of the time, the market tends to pull back in from new highs and lows, stopping breakout players out quickly, and causing repeated losses. So your trade plan must provide the right breakout criteria and filters, and that is a challenge this trader continually focuses on in order to improve the trade plan. Serial Sequent provides an excellent rule set to identify the best potential impulsive price action breakout out above one series of waves just at the place where a whole new series should ensue. But take a breakout play into support and resistance, and face price action coming right back into your face, a bit like running right into a wall after charging through an opening door. We call these price / wave levels where price should either reverse strongly, or fire off into a whole new set of waves with impulsive action Inflection Levels. Today, a critical Inflection level arrived right into a potential support / exhaustion level, coloring the potential trade entry criteria with a mixed signal. The trade, had it been taken, was worth more than 3 pts in the TF contract where it appeared.
Two qualifying/disqualifying aspects are always considered for breakout entries: "Is this the first or second trend direction of the day?" ...and, "Is there significant, impending support/resistance/exhaustion that will confront price shortly after the potential breakout occurs?"
But two things might be added to the qualification list of potential breakout rules. First, was there reversal action from the Inflection Level, suggesting a solid presence of support / resistance from which price action met rejection? Second, did this reversal action subsequently show distinct signs of weakness and/or repeated failure to progress away from the Inflection Level? And finally, did the ensuing reversal action use up a greater portion of the shot clock by a factor of at least 2 versus the time any of the previous wave pauses used up on the way getting to this Inflection Level in the first place?
If all three of these criteria are met, then chances are that a further breakout beyond the Inflection Level will break through the support/resistance/exhaustion numbers that lie just beyond the Inflection Level that had colored the breakout entry with a mixed signal. So if these additional qualifications are met, and price is in the second trend direction of the day, take the the trade even if the breakout faces a potentially significant level of support/resistance/exhaustion.
