200daymvgavgWeʼve talked about the “4 Close Reversal” pattern before. Like all reversal patterns in John Hillʼs 9 Patterns that Signal Trend Changes, they are especially strong around key levels on the chart.

This chart shows the ES contract during the October drop. Price broke down through the 200 day moving average. It had one day of follow through down. This day and the next both showed dramatic tails.

Tails below the candle body indicate buyers. Two tails in a row is called a “Tweezer Bottom”. This was the firs hint of a bottom in price.

The next day, price rallied. This rally carried ES above the highest close of the last four days – shown in the chart by the upper black line.  The lower black line is the lowest close of the previous four days. The 4 days are numbered. Here could be a good place to take a “nibble” long.  What is a “nibble”? A nibble is a small position with a tight stop.

The next day showed follow thru up. this day reversed both the 200 moving average and the previous pivot low. The low of the move proved to be “in”. Price continued to rally.

Lundy Hill