Vic’s 2B Top/Bottom

“Principles of Professional Speculation” writtenby Victor Sperandeo (Trader Vic),analyzes one of the powerfultop/bottom reversal techniques. TraderVic describes this technique, "In an uptrend, if prices penetrate the previous high, but fail to carry through and immediately drop below the previous high, the trend is apt to
reverse.” The converse is true for a downtrend. This pattern is also called“spring.”The 2B pattern rule is when pricesmake a new high or new low; they pull back for a healthy retracement. After retracement, the price tries to re-test the new high or new low. When this test of the new high or new low fails, and it does not maintain the prices above the new high or low, it signals a potential trend reversal. This setup is very powerful and signals the beginning of a correction.

Pay attentions to the breaking candles (hikakke). This oftenly occurs as bull/bear trap when nearing double top/bottom , Head and Shoulders or inverted SHS patterns.

2B Sell Setup
1. New High
2. Pullback
3. Another bar Close above Bar 1High
4. Mark Low of Bar 3. Wait for Close below 4
5. Short below the Low of 4
6. Target Previous Swing Lows

2B Buy Setup
1. New Low
2. Decent Retracement
3. Another bar close below Bar 1 Low
4. Mark High of Bar 3. Wait for Close above 4.
5. Long above the High of 4
6. Target previous Swing Highs