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Coils & Ledges Patterns

03/10/09 09:33:18 AM
by Austin Passamonte

Known by many names, price action coiled sideways in clear fashion are powerful setups from which to trade. Practically all markets form ledges and coils on all time frames, but the lesser volatile they are, the more liquid a symbol is and the greater a tendency to form ledges & coils. They almost always turn out to be solid support or resistance levels that refuse to break or break with emphasis before making solid directional moves.

Security:   ES
Position:   N/A

In Figure 1, ES futures held inside a 0.75-point total range for nine minutes straight. The close of that tenth of a minute candle/bar broke below the flat coil and promptly dropped 4.5 points straight down from there. Seeing price action pinned inside such a narrow range almost assures of a sharp directional break to follow.

FIGURE 1: ES, ONE-MINUTE. Seeing price action pinned inside such a narrow range almost assures a sharp directional break to follow.
Graphic provided by: TradeStation.
 
Soon after that pattern completed, price action went right back into another flat coil formation, which lasted 15 minutes through a one-point total range (Figure 2). Inevitable break from there popped higher in rapid fashion...

FIGURE 2: ES, ONE-MINUTE. Price action went right back into another flat coil formation soon afterward.
Graphic provided by: TradeStation.
 
... whereupon the ES futures promptly coiled back inside another flat pattern, spent 10 minutes gathering its composure there, broke back through the prior flat coil and continued several index points lower from there. See Figure 3.

FIGURE 3: ES, ONE-MINUTE. The inevitable break from there popped higher in rapid fashion, whereupon the ES futures promptly coiled back inside another flat pattern.
Graphic provided by: TradeStation.
 
More days than not, emini futures like all other markets tend to form distinct, defined flat-coil patterns of consolidated rest. Sooner or later, price action will emerge with stored energy expended with force. See Figure 4.

FIGURE 4: ES, ONE-MINUTE. Sooner or later, price action will emerge with stored energy expended with force.
Graphic provided by: TradeStation.
 
Simple price patterns have always worked in the past, and they still work today. Advent of computerization and automation is said to have muted or negated some price patterns. I haven't seen that happen. Price action may be altered to some degree(s) by computerization, but financial markets have been in a continual state of evolution since men began gathering beneath shade trees to swap paper on stocks & commodities. Supply & demand, and fear & greed will always be the cornerstone of trades transacted. The footprints of those cumulative decisions will always be reflected by price pattern behavior in real-time accordingly. Learning to read these simple roadmaps is one key to consistent success.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 03/10/09Rank: 4Comment: 
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