A Significant Buy Signal
The following sequence produces very significant buy signals:
1. The stock market enters into a trading range
2. A breakdown takes place through the lower boundary of the trading range.
This, perhaps, trips a few stop-loss orders in the process, extending the decline a touch, but there is basically little in the way of follow-through to the decline.
3. Prices quickly reverse upward back into and then through and above the trading range. The penetration of the upper boundary of the trading range is frequently followed by an extensive and dynamic market advance.
Sequences of this nature developed between February and March 2003 and again during July and September of that year. You might notice that the bullish implications of the early Mardl pattern were reinforced by an angle change measuremer just before the false shakeout that suggested the completion of the market’s currer downside objective.