The Power of 3 In the Market

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For what is probably the 5th or 6th time this year, subscribers took SDGR long on a swing on Monday at 66.12, anticipating a Rule of 4 Breakout.

A Rule of 4 is a breakout over a 3 point trendline.

You typically do not see quadruple tops or bottoms — the 4th time through is usually (not always) the real deal.

It is a simple but powerful strategy.

In my 35 year trading career, I have found that less is more and the more you try to see, the less you see.

It is easy to get overwhelmed with a myriad of indicators and opinions.

At the end of the day, I have learned the simple but powerful Law of 3.

Markets play out in 3’s.

Be it Triple Tops or Triple Bottoms, Head & Shoulders patterns, Triangle Pendulums, Cup & Handles or 3 wave impulses, markets tend to play out in 3’s.

A daily SDGR below shows a breakout over a 3 point declining trendline on Tuesday followed Monday’s large range upthrust.

Tuesday SDGR carved out stutter-stepped, carving out a TNT (Thrust, Noise (Pause), Thrust) pattern.

On Wednesday, SDGR continued Monday’s explosion and subscribers sold into the spike.

It’s time to look for the next setup.

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