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Introduction to One and Two

Bar Price Patterns

Marti n J . P r i n g

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One and two bar patterns are usually
short-term reversal phenomena.

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All one, and two bar price patterns must be
preceded by a short-term up or downtrend.

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These patterns indicate exhaustion, where
market psychology has reached a short-term
extreme.

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Alternatively,
Do not think ofthink
theseofpatterns
them asas offering
black
signals
andrated
white,between one and
but in shades five stars.
of gray.

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These
Do not patterns may occasionally
think of these act as
patterns as black
consolidation
and white, but formations asgray.
in shades of well.

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Outside bars

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Encompasses
Outside bar
trading range of
previous bar and
then some!!

We want the close to


be in the lower end of
the trading range.

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Encompasses trading
range of previous bar
and Close
then some!!
should be in the
upper part of the range.

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Sometimes encompasses
trading range of several
bars

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If close develops towards the high
expect an upside breakout

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S&P Composite

5-minute bar
Outside bar

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S&P Composite

5-minute bar

Outside bar failure

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S&P Composite

5-minute bar

Consolidation

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Measuring the Significance of Outside Bars

1. The wider the bar and the


wider the difference between
the open and close the better.

2. The sharper the preceding rally (reaction for a down


reversal) the better.

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Merrill Lynch 10-minute bar

1. Outside bar

Price often
consolidates prior to
rallying.
2. Good volume

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DJIA 60-min Bar

Confirmation

Outside bar

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Union Bank Daily

Same day confirmation

Outside bar

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NASADAQ 100 Daily

Outside bar

Outside bar closes near its


high after a small decline
and cancels previous
outside bar.

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Dollar/franc 30-minute
Outside bar

Outside bar

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Continuation outside bar
Cocoa Weekly
Whipsaw

Confirmation

Outside bar

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Sugar Daily

Possible reverse
..but this head and
is an outside barshoulders

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Outside bar
Dow Jones AIG Index

Consolidation
Outside bar

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Cocoa Weekly
Break above
line confirms
whipsaw.Outside bar

Strong second outside bar

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Bank of India Daily

Bank of India
Outside bar

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Vestel Outside bar

Outside bar

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NYSE Composite

Record volume

Outside
Outside day24 2002
day July

Daily Volume

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Summary for Outside Bars
1. One wide bar preceded by a persistent up or down
trend.
2. Totally encompasses previous bar.

3. The wider the bar, the more bars it encompasses,


the greater the volume the stronger the signal.

4. New trend sometimes take several bars to get


underway.

5. Signals of short-term duration be can be


dominos.
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Inside Bars

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Second bar
encompassed
by the first

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Better inside
Inside bar
bar

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Second bar
encompassed
by the first

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Inside bars indicate that prevailing
momentum has dissipated because
buyers and sellers are now equally
matched.

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S&P Composite

5-minute bar

Inside bar

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S&P Composite

5-minute bar

Inside bar

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S&P Composite

5-minute bar Inside bar

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Canara Bank Daily

Inside bar

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Summary for Inside Bars

1. Two bars preceded by a persistent up or down trend.

2. First bar relatively wide. Second bar totally


encompassed by first: the smaller the better.

3. The inside bar indicates a balance between buyers


and sellers. Signals are of a short-term duration.

4. Followed by a reversal in trend or consolidation.

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Two Bar Reversals

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Two bar reversals indicate a dramatic
change in sentiment..

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Sharp rally

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Closes near the high

First bar opens


near the low.

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Second bar opens
near the high

Closes near the low

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Resistance zone
The lower
the
resistance
zone the
better.

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Both bars of roughly
equal height..

and usually much larger than


those of the preceding trend

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Closes near high

Opens near high

The higher the


Closes near low
Opens near low support line the
better.

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S&P Composite

5-minute bar

Price closes near


high after a
sharp run up.

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S&P Composite

5-minute bar
Price opens near
previous close.

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S&P Composite

5-minute bar Nice low


resistance line.

Price closes
near its low,
and that of the
previous bar.

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US Bancorp Daily

Two bar
reversal

Heavy volume emphasizes pattern

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Sugar Daily Two bar reversal

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CRB Composite
Two bar reversal

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Dollar/franc Daily Nice low
Two bar reversal
resistance line.

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Look at more than one time frame and more
will be revealed!

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December 2006 British Pound IMM

10-minute bar

False breakout

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December 2006 British Pound IMM

Hourly bar

Two bar reversal


signals false
breakout

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December 2006 Dow

30-minute bar

Not much of a
reversal signal.

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December 2006 Dow

Hourly bar

Strong two bar


reversal

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December Australian Dollar 2006

10-minute bar

No reversal signals here!!

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December Australian Dollar 2006

Hourly bar

Instant confirmation

Two bar reversal

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Using one and two bar patterns as dominos
or reverse dominos.

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DJ Transports Daily

Nice
Twohigh
barsupport line
reversal
Smoothed RSI rallies
KST above oversold and
KST goes bullish

Smoothed RSI

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Summary for Two Bar Reversals

1. Two very wide bars of similar size preceded by a


persistent up or down trend.

2. First bar opens near low (high), closes near high


(low). Second bar opens near high (low) and
closes near low (high).

3.Reversals are of a short-term duration but are often


dramatic..

4. Occasionally result in domino effect.

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S&P Composite
Two bar reversal

Outside bar Two bar reversal

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6,500

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The The End End

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