Have been having a look at the outside bar that was printed in the US overnight, and thought I'd go through the individual tests I ran to come to the conclusion that I have.
The main goal for me in running this thread was to highlight the process involved in the way I look at the market, with the hope that it'll get people paying closer attention to the individual moves the market makes. Previously in the thread I had highlighted how the positioning of a pattern relative to what the market had been doing leading up to it can impact on what you would expect from that pattern going forward. The other big thing I find that can impact on patterns is volume. Hopefully the following will help to highlight that a little.
First thing about the outside bar that was made overnight was that it closed lower than the open. So the first test will look at outside bars that close lower than they open with no other filters at all:
On it's own, it suggests fairly flat trading for a couple of sessions, but reverts to being more neutral and in line with general drift upwards afterwards(there's a slight outperformance 15-20 days out, but isn't really worth getting excited about)
Now I'll run the test, but look for instances where 2 days ago was a short term high.
Tells a pretty similar story. Results are slightly less bullish than the prior test, but aren't entirely unexpected - the 2nd post in this thread highlights the difference in short term performance after price is at a new short term high versus a low FWIW.
Now for volume. Today's volume was higher than yesterday's. I'll run the same test as before, but look for the instances where we had higher volume than the prior day:
All of a sudden it gets interesting.When the results are filtered based on volume, the short term weakness becomes a little more pronounced(though isn't really anything to be concerned about if you are long), but the possible upside looks quite a bit better.
And now lets have a look at the same pattern, but filter for the times that it occurs on lower volume:
This pretty well flips the results on their head! Instead of the potential for a mild pullback and longer term strength, we see the possibility of a short term bounce and longer term weakness. This is why I generally try and look at volume as well as the general position of the market for a test, results can often become a lot more pronounced, and sometimes even show the exact opposite depending on the volume characteristics that go with the pattern.
Cheers