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the interpretation and application of price action concepts

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We all share a similar path in Trading. Even though you may not be a consistently profitable trader now, you can chose to enjoy the path. This alone may make the difference in your success.


Holy Grail Pattern


Trade in direction of trend. Retracement Trade.

Holy Grail Pattern from www.efuturevision.com

Grail trades are retracement setups just like the mini-skirt, but in larger timeframes than the 1 minute chart. As well, the grail is qualified by an ADX reading over 30. Again, the setup is a retracement toward the 20 EMA, with a target of a test of the last swing high or low.

Chart 1

Chart 1 above shows a grail sale on the Dow hourly chart. With ADX above 30, the Dow retraced to the area of the 20 EMA, and then tested down one more time to the prior swing low. If you trade the grail in these larger timeframes, you will typically need wider stops. You can also look for entries on smaller timeframe charts as a way of further managing risk.

Chart 2
We can use the examples of grail setups within a downtrend in Chart 2 above for a more detailed look. In a trending market where there is impulse, a retracement to the EMA on whatever timeframe is essentially a flag - a pullback in a trend. When price retraces to the EMA, if the ADX is above 30, it is called a grail buy/sell, which is nothing more than an ADX-qualified flag. On the right side of the chart above, we see grail sales. As with all retracement patterns, the objective is a retest - in this case a retest of lows. When that pattern hits objective, it has target, at which point the grail is over. We stop thinking grail then, and look for either continuation or bounce. If that market gives a new leg down, and the ADX continues to rise, and the market exceeds that last swing low, then the next pullback to the EMA will set up another grail.

In Chart 2 (above), the red arrows mark the pullback to the EMA. This is the grail setup. The blue arrow marks the target of the grail, which is retest of the low. Also note that ADX, shown along the bottom of the chart, is over 30 (we have ADX coded on our charts to show green above the value of 30). After the first grail, we have follow-through down - more impulse. The ADX continues to rise. Thus, the next pullback to the EMA, marked at the second red arrow , is also a grail. Price just about hits target on that one, too. Since there is no new leg down at that point, and since the ADX is now falling, the ensuing pullback to the EMA is not a grail. We must have progress in the direction of the trend before a new grail can form. This is true of any flag or other continuation pattern.

Chart 3

As with any technical pattern, a failure can be a more powerful signal in the opposite direction. In Chart 3 above of the 3 minute SP, after a leg up that drove ADX over 30, price pulls back to the area of the 20 EMA. However, rather than test back up promptly, price falls through the area of the EMA and then forms a long sideways ledge, with a declining ADX. The hesitance of the market to push back up is a tip-off to weakness. The failed grail buy setup then leads to long liquidation.



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