EUR/USD long-term charts
when looking at the Q-chart of this pair, one can see that the 2. quarter produced an inside-reversal-bar (IRB), followed by a doji bar in the 3. quarter. More often than not, the combination of IRB/Doji indicates a trend reversal (in any time frame).
This last quarter of 2015 has an open price of 1.1147 and there's always the possibility that this quarter will close again near the open price.
Since the low of the 1. Q of this year has not been violated, (1.0460), the high of the 3rd Q and the high of the 4th Q (after the bar is finished) are legitimate buy/stop entries according to the price bar formation rules.
At the same token, the low of the 1. Q of this year (1.0460) is a legitimate sell/stop entry.
Should the low of the 1. Q be violated, then both buy/stop entries a void.
As I have mentioned before, price consolidations, congestions and trading ranges often start with a long bar, which then turns out to be the measuring bar (MB) for the congestion. first indication of a price consolidation is a doji bar as the 3rd and/or 4th bar after the MB, as many congestions start and also end with a doji bar.
Any bar on the chart is an MB, if the following 4 bars (minimum) have the open or close price (or both) within the high and low of the MB.
When counting bars in a price consolidation, the MB has to be included in the count. Therefore, a consolidation consists of a minimum of 5 bars (MB + 4 bars).
This is the reason, why the 6. bar in consolidation is a very dangerous bar to trade most of the time.
It can be traded, but only if certain requirements are met.
"a little bit of knowledge is a dangerous thing"