Trading Highly Reliable 1-2-3 Continuation Patterns - Master Trader (2024)

Successful trading is all about objectively trading high-odd setups, entering with proper position size, then using proper money/risk management to manage in between.

As Master Traders, we trade any liquid stock, ETF, option, commodity or currency with a compelling pattern on with Multiple Time Frames (MTF) alignment using Master Trader Technical Strategies (MTS).

Master Trader teaches many top technical patterns for swing trading stocks and options: Buy and Sell Setups; Breakouts and Breakdowns; Professional Igniting Gaps; M and W Reversals; Failed Patterns and Shakeouts; and many more.

Today we are going to teach you a powerful setup — Master Trader 1-2-3 Continuations – on a trade we gave our subscribers last week.

Technical Setup of the Bullish 1-2-3 Continuation (+123)

Here is the setup, which applies to any time frame and any tradable instrument.

We traded the VRTX +123 in the Green Trading Room.

Some professional and option traders naively believe that nobody can predict price action. We beg to differ, and our staggering results prove otherwise.

These professional options educators rely on Implied Volatility (IV), Greeks and flawed statistics. Their statistics are flawed because when you add the use trend analysis the conclusions are wrong.

The basic +1,2.3 long setup is made up of three bars.

A Wide Range Bar (+WRB) that opens near the low of the range and closes near the high of the range, an inside bar (trades inside of the +WRB), and a break above the inside bar’s high. A few bullish inside bars are fine. It’s simple, but there is more to a quality setup.

All setups have different levels of quality. Applying Master Trader Technical Strategies (MTS) to each will substantially stack the odds in your favor.

The best +123’s set up from a base or consolidation as shown here.

Master Trader also teaches how to trade them from bullish gaps, shakeout patterns, and other setups using MTS.

Then we want what we call a “price void,” which means there is insignificant price resistance to the left for long trades, allowing the stock to move higher easily.

We actually prefer two inside consolidation days with the more current bar trading under the low of the prior inside bar, but in all cases both bars remaining in the upper 40% of the +WRB.

The shallower the retracement of the inside bars into the +WRB the better since that shows stronger demand. Retracements greater than the 40% area on a closing basis decrease the quality of the setup. However, if that retracement turns higher and the “body” of the candle is in the upper one third of the +WRB (a bottoming tail) that is ok.

The entry is to simply buy over the highest bar. The initial stop is under the low of the +WRB to give it breathing room. Thereafter, after one complete bar after entry, raise the stop to under the low of inside candles and then go into trail mode per your Trading Plan (e.g., trail pivots and tighten when climactic or nearing resistance).

With this bullish setup, you can buy the stock or use bullish option strategies using MTS.

In Master Trader’s Weekly Options Trader, these are awesome setups in which to sell puts and bull put credit spreads under the +WRB.

In selling options around compelling short-term turning points, you profit from the rapid decay of the option’s value into expiration in a few days – and the stock can still go against you somewhat to make full profit!

The Psychology of the +123 Setup

A Wide Range Bar (+WRB) is a power bar. Its range is at least twice as large as normal range candles which you can see easily. We want little to no tails (wicks). The +WRB represents solid buying (demand) throughout the entire candle. Master Trader calls these +WRB Igniting candles.

Now, the inside candle(s) which remain in the top 1/3 of +WRB is a bullish consolidation on a smaller time frame. On the example shown above with a daily chart, the two bullish inside days would have an incredibly bullish 15-Min. chart in a fairly tight trading range (which would be 52 bullish candles based on NYSE’s market trading hours).

This is because demand is strong and buyers are stepping up to accumulate shares on small pull backs intra-day. View the bullish inside consolidation day(s) like a “launching pad” to advance the stock higher on the breakout.

A retracement of greater than 50% of a +WRB on a closing basis puts into question the strength of the +WRB. Where did the buyers go?

However, if the issue retraces more than 50% and rallies all the way back near the high of the +WRB, that’s okay. It signals that buyers stepped up aggressively on the dip.

Bearish 1-2-3 Continuations (-123)

Here are three -123 trades given last week to the subscribes of our Swing and Options Trader, all delivering great gains.

Conclusion

Successful traders only need a few compelling patterns to generate profits and wealth through trading and investing in the markets. It then becomes your job to wait for those setups, and execute and manage with property money and trade management using the Master Trader Method (MTM).

The bull and bear 1-2-3 continuation patterns – as explained – are some of Master Trader’s favorite, highly reliable setups. They can be traded on any time frame. The setup and management are the same. Overlaying MTS will allow you to pick the best ones confidently.

Click Here– to Access the Options Credit Spread Program that puts you on the Master Trader Income Path.

Click Here to Learn The Master TraderSwing Trading Strategiesto profits over a few days to weeks. To invest in ETFs for weeks to months to generate wealth with compelling patterns using MTS, see Master Trader ETF Investment Trader.

Click HERE Master Trader Weekly Lessons for Investors and Traders will build your investing and trading knowledge and confidence to profit in all markets! Each lesson can change your financial future — only $11.97/month! Click HERE

Master Trader and You Building Your Financial Future Together!

Happy trading! If you have any questions or comments, please e-mail Greg Capra atGreg@mastertrader.comor Dan Gibby atDan@mastertrader.com