V.7:6 (188-189): Opening Range Breakout Part 7 by Toby Crabel

V.7:6 (188-189): Opening Range Breakout Part 7 by Toby Crabel
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Opening Range Breakout Part 7 by Toby Crabel

Bear hook is a day in which the open is below the previous day's low and the close is above the previous day's close with a narrow range relative to the previous day (Figure 1). As implied by the name, there is a tendency for prices following a bear hook pattern to move to the downside.

Figure 2 tabulates how this downward tendency after the pattern manifests itself in different markets and with a variety of opening range breakout (ORB) trades taken the day after the pattern appeared.

Figure 3 charts the bear hook patterns for December T-bonds. Notice the price action on the day following the patterns and the market's tendency to place the open on the high of the day.

Very briefly, an ORB is a trade entered at a predetermined amount above or below the opening range (the range of prices that occur in first 30 seconds to 5 minutes of trading). The predetermined amount, or "stretch," is the 10-day average of the differences between the open for each day and the closest extreme to the open on each day.

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