Video Update: 22 March – Rule of 3

Welcome to the video update for Monday, March the 22nd. Continuing our discussion of framing the markets, Trader Rick looks at the eurostoxx 50 13500 volume chart where price completes an abc pattern after making a swing high. Price tests the same basic level of resistance 3 times then either continues higher or retreats. This horizontal test on 3 attempts at the same price level is referred to as the rule of 3. After testing support or resistance 3 times price usually either pushes thru on the 4th attempt or reverses direction. On this chart price reversed lower, taking out a previous low, then set up an aggressive 9/30 short. Consider this a high probability setup.

Next up is the EUR/JPY weekly chart where price finished last week as an inside week. If price can rally up in to the sell zone that might provide a shorting opportunity.

Trader Rick next discusses the EUR/USD weekly forex chart price also was unable to rally in to the sell zone.

The crude (May) contract also had a rule of 3 on the 60 minute chart. Price retreated after 3 attempts above $83. Dial down to a lower timeframe to see if a selling opportunity presents itself. Note the 5 minute and 2 minute chart offered shorting opportunities.

In the stock indexes, Trader Rick discusses the Dow, NQ, ER and ES charts. Be sure to check all of these if you trade the indexes.

Good trading!

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Tags: Rule of 3, stock indexes