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| Volume and volatility often drop sharply as negative feedback reaches a climax. Bars begin to contract and overall short-term price rate of change declines. Watch this event in the context of the overall pattern to identify outstanding trades just before they explode. Here lies the empty zone (EZ) that marks the negative-positive feedback interface. Directional force reassumes control at this point, and price often ejects sharply into a new trending thrust. The EZ rarely registers on technical indicators because the math flatlines at these quiet spots and offers little useful information. One classic method to locate this hidden turning point searches the chart for the NR7, the narrowest range bar of the last 7 bars. Often, the next bar will be a breakout. The NR7-2, the second NR7 day in a row provides the trader with an even more powerful signal. Get on your helmet when you find one of these. |
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