Here is a picture perfect "bubble" pattern as described in Cahen's book showing on today's corn 3 minute chart (see the left side). The signal to exit is given at the yellow vertical line, when the (lower) Bollinger Band opposite where the price bars are located, completes its "plateau" phase and turns up. The right side shows the resulting "parallels" pattern on the tick chart.
In this chart, some additional signals to exit also occur. In the Bollinger Squeeze histogram (3rd panel from top), when the light green histogram bars change to dark green, this is also a sign to exit the trade. A third very early signal is provided by the reversal of the Klinger indicator, and when combined with the crossover of the EMA, provide an excellent exit point. Note also that the Klinger Volume indicator is beginning to show building accumulation again, as buyers are stepping into the market once again.Unfortunately, not all (perhaps most) trades do not fit this picture-perfect pattern and are therefor not always this predictable. Thus, we must also learn to make profitable trades when circumstances exist that are less than optimal. I have found when reading trading books, that the authors only show examples in their books that are photo perfect like this one. However, the markets quite frequently present many trading opportunities that are less than photogenic, but also highly profitable. Many superb trading opportunities are manifested in these patterns also. Becoming a trader capable of recognizing these more dynamic opportunities is an important skill to acquire.
