Trend reversals are usually signalled by Exhaustion Volume followed by volume Divergence patterns. The Exhaustion volume is the capitulation phase, where the final hold outs rush to join the trend – only to be the last ones in. It’s a reliable pattern and I love showing these “picture perfect” type setups.

But nothing is 100% (that’s trading I’m afraid). In the last 2 days we had two very nice Reversal Trades that set up without Exhaustion volume. Instead the 2,500 level on the Emini acted as a wall that couldn’t be breached successfully.

Monday’s trade had RAMBO patterns at 2,500 – that showed the Amateurs were leading the break and it was therefore suspect. Tuesday’s trade had a strong selloff – with Exhaustion selling volume – right around the 2,500 level, showing traders were anxious to take profits and get out. Both were nice Short trades.

Hi Barry, I took the breakout to trend trade today at 9:46, short at 98.25, out for 4, then quit for the day. I was a little hesitant to take this as ex buy and bear div was only showing on 500 tick chart. It worked for me this time, but i wanted to ask is this a trade you took or would have taken yourself given the less than perfect setup on momentum indicators? Really like these indicators and still learning. Dave B.

Hi Barry. I have to say I’m very impressed – today was picture perfect EMiniWatch! Small ramp up at the open to hit the stops above the big figure/yesterday’s high; Pro bars at the top on 4500 (and other TF’s); momentum divergence on 500; two LREPs for a reversal (the first one a bit aggressive I suppose); confirmation with break of 1500 support; and down move caught (maybe not, we’re still trading) by support on 4500. Neil S.

Click here to view the Reversal Trades video on the website.

Good luck with your Emini trading this week.

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