Michael 1.

Parsons

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Chart ,

SP 500 E·mini 10 minute

The secondary confirmation is a panic bar. This occurs when price exceeds
the range and the price bar explodes like a rocket and never looks back.
Momentum picks up and continues to increase. How far does a bar need
to extend before it is considered a panic bar? There is no exact answer to
this, but the key to determining this is found in the action ofprevious bars.
Look before the trading range and compare the pace that price set within
the market. A panic bar will often extend twice the length as normal and
stand out as significant. A market is also li kely to have other examples
of panic bars to compare with, such as when a major reversal occurred.
Markets tend to be prone to panics so it would be unusual to have just one
showing on any chart. The problem that you can have with panic bars is
that you can place an order early on just as the move gets started and still
not have it filled until it comes to an end, leaving you exposed to higher
risk. Fortunately panic buying usually begets panic buying so it is still
li kely to be a solid trade as long as the market doesn't take a break.
Beware of holding a position based on a panic that extends through a
weekend or holiday. Breaks in trading will take the steam out of panics and
they will lose their momentum. Figure 2-3 shows an example of a panic
bar.
The goal of confirmation is to provide some sort of indication that a
breakout is for real and not a trap. If a market exceeds a trading range
and then returns back into that range, you are not likely to see it break
out in the same direction again for a while. In fact, a false breakout often
signals that the market will move in the opposite direction. So beware
ofany time you see a market return back within34a prior range.