What Is the Expansion Bar Signal?

An expansion bar is a bar on🍸 a priceꦬ chart that represents a wider price range compared to the bars for price movements of previous days.

The expansion bar signal occurs when a price bar closes near the intraday high or low. It is an indicator in technical analysis that traders watch for because it can serve as an alert for𓂃 noteworthy price movements and changes in market conditions.

Observant traders can use 𝓰the expansion bar signal to make profitable buy and sell decisions. 

How Expansion Bar Signals Work

These wide range bars, which indicate greater-than-average price ranges at key market intersections, may confirm major price developments, such as a successful or failed test at a 澳洲幸运5官方开奖结果体彩网:moving average.

At other times, they can signal a sharp increase in momentum, with onไe side giving in and allowing a trending security to surge higher or lower quickly because the friction of opposing positions has been removed from the system.

Breakouts and High-Volume Expansion Bars

Moreover, legitimate 澳洲幸运5官方开奖结果体彩网:breakouts and 澳洲幸运5官方开奖结果体彩网:breakdowns should elicit at least one major wide range bar because the security is pushing beyond an easily observed boundary, like a 澳洲幸运5官方开奖结果体彩网:trendline or horizontal 澳洲幸运5官方开奖结果体彩网:resistance level.

In turn, this should encou🎐rage a large number of market participants to come off the sidelines in an emotional act that yields greater-than-average voဣlume.

Conversely, the lack of a high-volume expansion bar during a breakout or breakdown generates a notable 澳洲幸运5官方开奖结果体彩网:divergence that tells us to watch for a reversal that traps the trend-following crowd.

While it isn't necessary for the bar to appear on the day of the breakout or breakdown, it should appear within the broader set of price bars that form the rally or sell-off wave. 

Expansion Bar Signals at Moving Averages

Price moves into the 50- or 200-day exponential moving average (EMA) create special conditions for wide range bar 𒁃signals that traders can use for timely entry or exit, dependingꦑ on the outcome.

Patience is required because the testing of price levels can unfold over many weeks, during which price bars💃 congest as bulls and bears fight for domination.

This conflict can produce multiple signals, with bars expanding away from the moving average🌳 on higher-than-normal volume and 💟then reversing gears into another test.

Mul𝓀tiple Expansion Bars Build to Reversals or Continuations

Each 澳洲幸运5官方开奖结果体彩网:expansion bar adds to an underlying theme that eventually yields either a sustᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚained reversal that continues thꦺe trend in place prior to the test or a sustained continuation move that breaks the moving average.

The complexity of this testing process and its multiple incarnations can fool less-prepared traders who jump on each wide range bar and then get 澳洲幸运5官方开奖结果体彩网:whipsawed in the opposite direction.

How to Improve Timing

You can im♓prove trade timing with expansion bar signals by looking for a volume surge that shows high emotional levels.

In addition, a 5,3,3 Stochastic indicator improves results after extended tests, with the observant trader watching for the final thrust to coincide with a bullish 澳洲幸运5官方开奖结果体彩网:crossover for a rally and bearish crossover for a decline, preferably aligning with 澳洲幸运5官方开奖结果体彩网:overbought and oversold levels.

It’s easy to see how expansion bar signals c🍃ould have benefited your bottom line when real estate giant CBRE Group grou⛎nd through three tests at the 50-day EMA in a four-month period:

1. In December, the price bounced at the moving average after an extended test, posting the widest range bar in two weeks on increasing volume, as Stochastics showed a bullish crossover at the oversold level.
2. In February, it completed a successful 12-day test by gapping above the moving average on the highest volume in eight sessions and posting the widest intraday range in three weeks. Again, Stochastics showed a bullish crossover at the oversold level.
3. In March, it ended a six-week 澳洲幸运5官方开奖结果体彩网:consolidation on top of the moving average with the widest range bar of the year. Stochastics jumped into the overbought level in a "Stochastics Pop" 澳洲幸运5官方开奖结果体彩网:buy signal (popularized by Jake Bernstein in his 1995 book "The Compleat Day Trader").

The Bottom Line

Expansio💯n price bars ca🅠n carry with them a wealth of information that can inform trading activity. They often generate important signals that traders can use to enter or exit the market effectively.