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Welcome, welcome everyone to
the Trading Playbook this Saturday. Hope
you guys are having a wonderful weekend.
Um before I go any further, guys, please
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what technical indicator you guys want
me to talk about next. My name is Lot
No, here with Verified Investing, your
host. And today, with a very special
episode, we're talking all about
topping tails and bottoming tails. That
is this week's play.
So, let me go ahead and share my charts
and then talk a little bit about what a
topping tail or a bottoming tail is.
Now, there's a couple criteria that
you're going to have to kind of get
familiar with for a topping tail and or
a bottoming tail. So, just like with the
other episodes, I'm going to go ahead
and write this down. But, essentially, a
topping tail
tail
/ bottoming tail
is
a reversal signal.
I'll go ahead and move this over
slightly for you guys in just a moment.
It is a reversal signal.
Okay?
So,
this is basically what you're looking
for. I'm going to give you a list of
criteria.
You're looking for
a topping tail in this case.
It has to be the occur at the highest
point
in the last 90 candles.
Okay? Whatever time frame you're talking
about, daily, weekly, hourly, 10 minute,
1 minute, doesn't matter. Has to be the
highest point or lowest point or
bottoming tail
in the last 90 candles.
Okay?
Uh the candle size
the wick, sorry.
The wick must be at least 50%
of the length.
And I'll move this over in just a
moment.
Um and the body
be
the the close of the candle, excuse me.
Close of the candle
must be in the lower
5% of
And this will all make sense in just a
moment.
Right?
So, this is a topping tail {slash}
bottoming tail. So, what are we looking
for?
And and the And a bottoming tail would
just be the reversed.
Would just be the inverse of that. So,
what are we looking for? Well, first of
all, we're looking for the highest point
in the last 90 candles. And in this
case, you have one right here. If we go
back 90 candles
we can see
that it is indeed the highest point of
the last 90 candles. Second thing the
the wick must be at least 50% of the
width of the entire candle.
And here you can see it's a well over
50% of the entire width.
All right? Well, the close of the candle
must be in the lowest 25%
of said candle.
And in this case, it is.
Right? It's just about 25% just about
right there.
So, what does that mean? Well, it is a
reversal signal. It says that, "Hey,
the top is likely
to be in right here." And in this case,
we're talking about LITE on the weekly.
Let me go ahead and show you an
additional
chart and you guys tell me if you can
find the topping tail. All right. I'm
going to draw right this on the screen.
You can pause it, test it yourself.
Where do you see
the topping tail?
In this case, you would have one right
here.
Why is that? It's the highest point in
the last 90 candles. Let's go through
our checklist.
Highest point in the last 90 candles,
you can see my candle count right here.
Secondly, the wick is at least 50%
of the entire candle length
and we close in the bottom 25% right
here of the entire candle, telling me
what? That we're favoring a pullback.
Same thing with LITE, saying what?
You're favoring a pullback, right?
And you can see from LITE, you had a 30%
drop on MRVL here. You had about a 34%
drop.
Well, if a bottoming tail is just the
exact inverse of that,
can you guys spot
the bottoming tail?
I will pause it right here and you tell
me where you see
the bottoming tail
or if you even see a bottoming tail.
Well, it is right and it's smaller here,
but it is smaller right here.
Let's go through our checklist again.
It is the lowest point because it's
inverse in the last 90 candles. Sure.
The the wick is at least 50%
of the entire
candle.
Correct? And we close in the top, not
the lower, but the top 25%
of
the candle. And you saw from that
bottoming tail, about a 16 and 1/2%
move to the upside.
But how do you use this? How can you use
this
to get an edge?
Well, for me, there's a couple different
ways that I could personally consider
using a topping tail or bottoming tail.
One way to do it is looking to
potentially enter on a retrace.
Now, what does that mean in this case?
Let's say
price you had this bottoming tail, and
then you saw price come back below, but
not all the way quite and reject this
price,
then this is still valid. You would look
for an entry somewhere under this
close,
looking for a move higher. Similarly
with this topping tail and MRVL, you
look for an entry short, you know,
anywhere above that price where it
closed, right?
But there's a couple common mistakes
that people make when they're trading
topping tails and bottoming tails. And
and and that is understanding when this
were to get negated. Now, there is a
third rule that I have yet to add on
here that is the most important rule and
it's actually explaining when it gets
negated.
So,
I'm going to write it here.
Topping
a topping {slash} bottoming tail gets
negated when
price closes
above
the top of the
tail wick.
So, what does that mean?
What does that mean? That means that
this would be negated, this topping tail
would be negated
if you had price ever
Excuse me, close
above this 330 region, basically. If
price ever closed above this
topping tail, it would be negated.
Similarly and inversely for
this bottoming tail, price would 100%
get negated if price ever closed below
this 12169
region.
That ever happens, this reversal signal
is absolutely off of the table.
But, let's talk a little about about
what you can expect in tomorrow's play
call.
In tomorrow's episode, guys, I'm going
to give you three actionable trade
setups using topping tails that you
could potentially look for an entry on.
And the best thing that I personally
like about topping tails and bottoming
tails are that they give you an exact
stop out level to where you're like,
"Okay,
it's negated. This topping tail, it's
negated. This bottoming tail, I will go
go and stop out. No harm, no foul.
That's it. We're done. All right? With
that being said, that's all I have for
you to do uh today, excuse me. My name
again is Lawton Ho here with Verified
Investing. I hope you have a great and
wonderful rest of your day, guys, and
I'll see you in the next one. Bye, guys.
>> That's the Trading Playbook. Today's
episode was your film study, the
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