Inside / NR4 Bar
Inside bar - current bar's range is
within the previous bar's range. Another way of saying the same
thing - an inside bar has a low greater than the previous bar's
low and a high less than the previous bar's high.
range 4 - current bar's range is the smallest range of any of
the last four bars.
Inside/NR4 bars are a sign of indecision with the current trend ... or
it's a consolidation prior to a breakout.
The price bars marked in RED
are the Inside/NR4 bars for General Electric, GE.
For entry and initial stop placement: buy as the stock trades above
the Inside/NR4 bar, sell as the stock trades below the Inside/NR4
If you can see this pattern on a chart, then
you know that the possibility of a very profitable trade is very high.
What makes this pattern so successful?
For one, an inside bar means that there was just not
enough interest in the stock to move it decisively one way or another.
As sure as day follows night, so does an increase in volatility follow
the restricted trading of an inside day. The stock becomes like a
race horse ready to hit the ground running out of the gate.
The other half, the narrow range bar tells us that the
stock has consolidated relative to it's recent action.
You understand that inside/NR4 bars are the perfect
setup for a low risk entry into a stock. Start to spot this little
pattern on a stock chart. It's the secret key to picking
tomorrow's winner's - today!