Test Bar
What is a test bar?
IMO, this is the most important bars that we need to see if we want to go long. We need to see strength in the background. A test is testing for supply. If there is too much supply, prices will not be supported. If SM feels that they haveccumulated enough, they will like to test if supply is still prevalent before pushing up the stock.
The 2 charts below, Kreuz and Skyone will highlight to you some principles of a test bar.
Kreuz
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Just recently updated this from the US. Micron
A failed test ...
This is the reason why we should never enter on a test bar. A test bar could be ambiguous. Sometimes, i associate a test bar with a no demand bar as well. It is due to their similarity and characteristics thus, never enter your trade on a test bar. If you are very sure, have a trading plan on your stops. One hardly recover their position after going long on the day of the failed test. Always check the background, if you have weakness in the background and you see a test, but the is next bar is down...this is a very strong sign of additional weakness and is also called a failed test.
IMO, this is the most important bars that we need to see if we want to go long. We need to see strength in the background. A test is testing for supply. If there is too much supply, prices will not be supported. If SM feels that they haveccumulated enough, they will like to test if supply is still prevalent before pushing up the stock.
- Test bar usually has a long lower tail, dipping into territories of previous low where we see high volume before closing ideally in the middle or high. It probes down then go up.
- A test bar don't work in isolation. We will need to see the next few bars to confirm whether the test is a sucessful test. The next bar should close high, above the test bar with ease. Volume of the bar should be low but higher than the test bar.
The 2 charts below, Kreuz and Skyone will highlight to you some principles of a test bar.
Kreuz
\
Skyone
Just recently updated this from the US. Micron
A failed test ...
This is the reason why we should never enter on a test bar. A test bar could be ambiguous. Sometimes, i associate a test bar with a no demand bar as well. It is due to their similarity and characteristics thus, never enter your trade on a test bar. If you are very sure, have a trading plan on your stops. One hardly recover their position after going long on the day of the failed test. Always check the background, if you have weakness in the background and you see a test, but the is next bar is down...this is a very strong sign of additional weakness and is also called a failed test.
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