Channel Surfing

good-bye. This habit works to our benefit, allowing us an opportunity to

exploit the changing of the guard.
There are three primary ways in which a changing of the guard takes
place.

l. When a trend reverses direction

2. When the trend continues after pausing
3. Changes in momentum and trend shifts

Each of these events will tend to exceed a channel line and normally
require us to exit a market. But under these special circumstances it may
actually be more appropriate to either stay in a market or even enter.
While we have already explored some of these entries, the key here is to
understand the actual mechanics behind these changes and the subtleties
that make or break a trade.

When a trend reverses direction

Trends reverse direction all the time. It is not a question of "if" a
trend will reverse, but when. When a price spike breaks an outside
channel line it frequently serves as an early warning that a reversal is
imminent. Unfortunately, a spike is not always present during a
reversal. On the other hand, a reversal always breaks the inside channel
line because there is simply no way to avoid it. But just because our
inside channel line has been broken doesn't necessarily mean that price
is completely done with it. You see, price created this channel line in
the first place because it was naturally attracted to a certain line of
progression. Even though the trend is over, the attraction is not.
Frequently you will see price attempt to return to this line as if to kiss it
goodbye. This doesn't happen all the time, but enough to give you a
trading opportunity if you miss the initial channel break.
There are also times when it would be helpful to have more confidence
that a reversal has actually occurred, particularly if a trend has had a habit
of false reverses in the past. Or you may have missed the initial break
of the channel line and don't want to risk chasing the market. In either
case, price's kiss goodbye may be the solution you have been looking for.
Catching this initial pullback at its zenith can provide you with a low
risk, high profit opportunity. If you are wrong you risk only the difference

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