If you really want to know about rain, knock yourself out Rain
What we are really talking about here are probabilities. This concept is so important in trading and should be a key component used in determining entry and exit of trades. For an example, let’s take a look at the Area chart of PMTC (Parametric Technology Cp):
As you can see, price is heading up into what I call the Price Zone. The volume has been elevated recently, and this is quite a rocket ship up move for price. So, what is the highest probable path for price here? Can it just keep going? Sure. But was is the most likely scenario? A pause? A pullback?
I asked a question during the week on twitter on whether the Risk was to the upside or downside. Roughly 80% responded that it was to the upside which surprised me a little. In looking at this chart, how would you answer?