One of the great trading books written are Victor Sperandeo Trader Vic series...below is a lesson from and one of his favs the 2B rule...I believe the SPX has given this sig and possibly confirmed today.
2B Rule
Point 2 above is essentially a failure of prices to carry past a previous rally (or previous selloff). Sometimes prices go just past then immediately reverse. Such a case is Sperandeo's rule 2B,
- 2B. If prices rise just above the previous rally high but then immediately fall back down.
Or for a downtrend change,
- 2B. If prices fall just below the previous low but then immediately rise back up.
Sperandeo regards 2B as a powerful pattern, and in assessing the probability of a trend change he weighs it higher than any other single criterion. The advantage of a 2B is that it lets the trader get almost the exact top (or bottom) of a move (with a stop-loss at the failed high or low). Even if it worked only 1 in 3 times the reward side is excellent due to getting in early.
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