Broadening swings, demand tests, and volume filters

Expanding highs and lows

A broadening triangle is drawn as rising swing highs together with falling swing lows. The same geometry may later be labeled either a pause or a reversal.

The fourth swing as a stop-run

In the bullish classroom sketch, the third-to-fourth swing is treated as more bearish when it lasts longer and covers more ground than the first pullback and also undercuts that first pullback low, because resting sell-stops below the earlier low can be triggered and nearby sentiment can flip.

Editorial reading: that undercut is the stop-run. Price travel through a prior swing is expected to trigger resting protective orders and force nearby positions to flip.

The with-trend setup after the fourth swing is specified as a completed demand pattern lasting one to four days, and only if price then advances back through the earlier broken support.

Compact demand tests

Inside that demand window, a double bottom is defined as buyers appearing at the same support on two sessions, with a long trigger above the second session high and a risk line under that same high.

A spring-style demand test is specified as a down-day that reverses and closes on its high, followed by one to three narrow sessions on light volume, with a long trigger above the reversal-day high after that pause.

If price then prints a fifth swing to a new high, the interval spanning the first four labeled points can be reread as a corrective phase rather than a finished top.

When continuation is rejected

In the March 1990 Treasury bond futures example from the second half of 1989, a mid-September failure to remain above the August 17 high was the stated reason to reject treating the later expanding swing as another fourth-point continuation from the prior sequence.

In that same bearish expanding sequence, the fourth swing's distribution was described as complicated by the time spent building a double top.

When the two adjacent expanding sequences were joined and the later peak was counted as a seventh point, the resulting seven-point broadening top was described as half of the larger reversal that ended the preceding bond uptrend.

Volume on a later peak

A later high that coincided with a volume spike through a prior peak was labeled a climactic supply event, while a subsequent advance accompanied by weak volume was labeled insufficient demand.

Editorial reading: volume on that later break of a prior peak is the participation filter that decides whether the same expanding geometry is still a with-trend pause or already the first half of a larger top.