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Caps - RBD/DBR
CREATED: MONDAY, 18 FEBRUARY 2013

When price makes a rally with a strong pole up (this whole lesson works vice versa for poles etc
down), there's sure to be some pro t taking by the institutions, allowing price to drop back into the
pole.

Price will very often ag at the top of the pole, as the institutions either begin to add long positions
to take price higher, or begin to hide short positions to turn price.

This article deals with the latter scenario; price rising (rally), agging (base), and then dropping
(drop!)

The ag was a way for the institutions to keep retail traders buying in the expectation of an advance
in price, giving them lots of orders to sell against.

 
  
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Seen in a slightly
higher timeframe, this
is a very uniform cap
on price, and in every
TF there's a really
strong pole moving
down from it

The cap price is obviously way too high, so when price returns to it, the sellers are waiting.

There are often other signs that a cap will hold, such as the engulf in the chart above, or
compression on approach

Caps are simply excellent places to look for price to turn!

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Here's a video on Price Caps

https://mega.nz/#!gMJy0SwQ!x2LFxilpHjhV5St071Bmmy21zIMrz8XD1RZBqE_dejY (password:
RTM2018)

You can discuss the article HERE

Homework:

Mark at least 200 caps on your charts - there are so many to see that it won't take long.

Draw a box from the cap to where price hit it later. Note how price approached the caps, and how it
reacted. If price broke the cap, note what happened next. Was the cap still relevant?

   

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