Congestion – When a new high (low) on a chart is followed by at least two prices in the opposite direction. Prices do not have to be consecutive, however, close on second down day must be lower/(higher) than first day.
Valid Congestion Patterns
Non-Valid Congestion Patterns
Hill’s Day Trading
- Support and resistance points are the previous daily highs, lows and closes.
- Action around these points determines immediate direction of the market.
- A 5 or 10 minute bar chart can be used to advantage to evaluate market at these critical points.
- Action between high and low is in no-man’s-land. Intraday action may be misleading until one of the critical points is tested or penetrated.
- Most of the time only sell at previous top, and only buy at previous low. There are exceptions of this, of course. A five minute chart will usually reveal whether penetration is aggressive. A non-aggressive penetration calls for selling at the top or buying a bottom.