🌹Teaching on the Pregnancy Line Chart⬇️Confirmation of Pregnancy Line Entry👇

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1. Confirmation of Pregnancy Line
Imagine a consolidation range where the price has been stuck for a long time. Suddenly, the price begins to break out and closes above the range (red candlestick). This phenomenon indicates that buyers have defeated sellers at this moment, and the market "may" continue to push upwards and enter an uptrend. See the image below 1⬇️
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But at this point, the question arises: how can we ensure that this breakthrough is valid and not a false breakout? The market is likely to reverse and return to the consolidation range again, isn't it? See Figure 2 ⬇️
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So, one way is to wait for the price to pull back without breaking the previous resistance level to confirm that this breakout is genuine. However, many true breakouts do not pull back, and we often see the price directly rallying, which can cause you to miss out on a very good long opportunity. See the chart below 3⬇️
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So, if the market does not actually pull back, I usually choose the second method, which is to use a bullish engulfing pattern to confirm the validity of the breakout.
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🔥2. What is a pregnant line?
The Pregnant Line, also known as the Mother and Child Line, consists of two candlesticks: the first, larger one is the "Mother Line," and the second, smaller candlestick is the "Child Line," which is contained within the Mother Line. Key: Just compare the highest and lowest points; whether it is the body or the wick is not important. See the figure below 4⬇️
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Uptrend: The left side of the chart indicates that bulls no longer buy further in the second phase, resulting in a small green candle; Downtrend: The right side of the chart shows that bears no longer sell further in the second phase, resulting in a small red candle; The appearance of a child line immediately after the mother line indicates that the buyers and sellers in the market are hesitant, just like a rest area on a highway, where everyone chooses to rest and adjust before continuing their journey. At this point, everyone should understand the pregnant line chart pattern and the reasons for its appearance, so let us use the pregnant line to help assess the authenticity of breakouts in a fluctuating market. See the image below 5⬇️
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If the price breaks upward from the consolidation range and a bullish engulfing pattern appears, it indicates that both buyers and sellers are beginning to hesitate, and the market is in a state of rest and adjustment. See the chart below 6⬇️
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At this point, if the price continues to rise, it indicates that the buyers continue to dominate, while the sellers' attempt to push the price back into the consolidation range has failed. Therefore, the breakout of the candlestick pattern once again confirms the validity of this breakout from the consolidation range, and subsequently, the price continues to develop upward.
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🎉3. Let's go back to the real chart and show everyone an example:
On the 15-minute chart of GBP/USD, the market failed to break through the resistance level three times, and then the price hit the resistance level for the fourth time and formed a breakout. See the chart below 7⬇️
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After breaking through the resistance level, a harami pattern forms, with the smaller line being a doji indicating that neither the bulls nor the bears have gained the upper hand, and the price begins to hesitate.
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Then there are two scenarios: (1) the seller is stronger, and the price is pushed back to the original range, indicating that this was a false breakout.
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(2) The buyers are stronger, and the price continues to rise, indicating that this breakthrough is effective.
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Next, let's see how prices will develop in real situations.
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The market has chosen the second scenario, which is that prices continue to rise, thus the breakout is valid and not a false breakout.
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🎉 Fourth, how can we participate in this transaction?
Generally, Brother Liu will prioritize going long after a breakout, and when a bullish engulfing pattern appears, he observes when the price breaks above the highest point of the mother line. After the breakout, I will enter, placing the stop loss below the lowest point of the child line. Zooming in on the chart, everyone will see more clearly: see the image below 8👇
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After entering the market, I plan to close half of my position when the risk-reward ratio reaches 2:1. The take profit point for the other half of the position can be placed at the resistance level that hasn't been tested before, or you can use a trailing stop to protect your profits. Let me show you how the market will move next: See the chart below 9👇
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🎉Have you learned it?
Please remember: the market is not something that can be predicted in advance by anyone. We can only make trading plans based on existing observations. If the market trend does not align with our trading plan, we should decisively abandon it. A very important trait of a professional trader is to maintain patience and only wait for their own trading opportunities.
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