Method: Break Out/Break Down Failure/Rebound

Hypothesis: According to Livermore, stocks in a down trend that bound from a new low can be traded
with an edge either long or short based upon the proceeding price action once this pivotal point is
established. In keeping with the spirit of set up, we know that two vital pieces of information are
locating the pivotal point and the ensuing price action thereafter.
What we know from the price action description that price is in a down trend and makes a new low and
has a quick rally in a few (3) days, then it backs and fills for a week (5 or in his case 6 days), then it
extends its rally (no time given) after which the market becomes dull for a few (3 days), then one day it
becomes active and goes down 3 or 4 points. From this information, the time horizon to initiate this set
up will be 14-21 trading days. Additionally there is $3-$4 price move that can be taken into
consideration as an alert to keep this stock on a watch list as all the prerequisites for the pattern are
being met and the pivotal point is coming into play.
For Lows:
Price Per Share $30+
Min/Vol Requirement
Recent Low TC
L21 <= MINL250.21 OR L20 <= MINL250.20 OR L19 <= MINL250.19 OR L18 <= MINL250.18 OR
L17 <= MINL250.17 OR L16 <= MINL250.16 OR L15 <= MINL250.15 OR L14 <= MINL250.14
AND (C > MINL21 OR C > MINL20 OR C > MINL19 OR C > MINL18 OR C > MINL17 OR C >
MINL16 OR C>MINL15 OR C>MINL15)
--Optional C < C1 - 3
For Highs:
Price Per Share $30+
Min/Vol Requirement
Recent High TC
H21 >= MAXH250.21 OR H20 >= MAXH250.20 OR H19 >= MAXH250.19 OR H18 >=
MAXH250.18 OR H17 >= MAXH250.17 OR H16 >= MAXH250.16 OR H15 >= MAXH250.15 OR
H14 >= MAXH250.14 AND (C < MAXH21 OR C < MAXH20 OR C < MAXH19 OR C < MAXH18
OR C < MAXH17 OR C < MAXH16 OR C < MAXH15 OR C < MAXH14)
--Optional C > C1 + 3
Entry:
There are 4 possible entries that Livermore gives based upon price action.
For 52 Week Highs:
1) Entry when price eclipses the pivotal point by $3
2) Short entry when price does not break the pivotal point by $3 and reverses $3 instead
For 52 Week Lows:
1) Short when price drops $3 below the pivotal point
2) Long if price drops less than $3 below pivotal point and reverses $3 from that point insted
Stop:
Aggressive stop placement, the low of the bar that breaks the entry point.
Less aggressive, break of the pivotal point indicates failed pattern.

Risk:
2% continuation break of 52 week high, 1% all others.