🔥 Pregnancy Line Diagram Teaching ⬇️ Pregnancy Line Confirmation Entry 👇

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1. Confirmation of Pregnancy Line
Imagine a consolidation range where the price has been trapped for a long time, suddenly the price starts to break out and closes above the range (red candlestick). This phenomenon indicates that buyers have overcome sellers at this moment, and the market "may" continue to push upwards and enter an upward trend. See the chart below 1⬇️
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But now the question arises: how can we ensure that this breakthrough is valid and not a false breakout? The market is likely to reverse and return to the consolidation range again, isn't it? See the chart below 2⬇️
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So, one way is to wait for the price to pull back without breaking the previous resistance level to confirm that this breakout is genuine. However, many true breakouts do not pull back, and we often see the price go straight up, which can cause you to miss a very good long opportunity. See the chart below 3⬇️
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So, if the market really doesn't pull back, I generally choose the second method, which is to use a pregnant line to confirm the validity of the breakout.
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🔥2. What is a pregnant line?
The Pregnant Line, also known as the Mother and Child Line: It consists of two K lines, with the first larger one being the "Mother Line" and the second smaller K line being the "Child Line," which is contained within the Mother Line. Key point: Just compare the highest and lowest points; whether it is the body or the wick is not important. See the diagram below 4⬇️
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Uptrend: The left side of the chart indicates that bulls stop buying further in the second phase, resulting in a small green candle; Downtrend: The right side of the chart indicates that bears stop selling further in the second phase, resulting in a small red candle; The appearance of a child line immediately after the mother line indicates that the buyers and sellers in the market are hesitant, just like a service area on a highway, where everyone chooses to rest and adjust before getting back on the road. At this point, everyone should understand the pregnant line pattern and the reasons for its appearance, so let's use the pregnant line to help assess the authenticity of breakouts in a volatile market. See the chart below 5⬇️
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If the price breaks upward from the consolidation range and a bullish engulfing pattern appears, it indicates that both buyers and sellers are starting to hesitate, and the market is in a state of rest and adjustment. See the chart below 6⬇️
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At this time, if the price continues to rise, it indicates that the buyers continue to dominate, while the sellers' attempt to push the price back into the oscillation range fails. Therefore, the breakout of the pregnant line once again confirms the validity of this breakout from the oscillation range, and subsequently, the price continues to rise.
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🔥3. Let's go back to the real chart and show you an example:
On the 15-minute chart of GBP/USD, the market failed to break through the resistance level three times, then the price hit the resistance level for the fourth time and formed a breakout. See the chart below 7⬇️
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After breaking through the resistance level, a bullish harami pattern forms, with the smaller line being a doji indicating that neither the bulls nor the bears have won, and the price begins to hesitate.
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Next, there are two situations: (1) the seller is stronger, and the price is pushed back to the original level again, indicating that this time it was a false breakout.
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(2) The buyer is stronger, and the price continues to rise, indicating that this breakout is valid. Next, let's see how the price will develop in real situations? As shown in Figure 7 ⬇️
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The market has chosen the second scenario, which is that prices continue to rise, so the breakout is valid and not a false breakout.
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🔥Four, how can we participate in this transaction?
Generally, Brother Liu will prefer to go long after a breakout, and will observe when the price breaks above the highest point of the mother line when a pregnant line appears. After the breakout, I will intervene and place the stop loss below the lowest point of the child line. By enlarging the chart, everyone will see more clearly: see the image below 8👇
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After entering the market, I plan to close half of my position when the profit-loss ratio is 2:1, and the take profit point for the other half can be placed at a resistance level that hasn't been tested before, or you can also use a trailing stop to protect your profits. Let's take a look at how the market will move next: see the chart below 9👇
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🔥Have you learned it?
Please remember: The market is not something that can be predicted in advance by anyone. We can only make trading plans based on existing observations. If the market trends do not align with our trading plan, we should decisively abandon it. An important trait of a professional trader is to maintain patience and wait for their own trading opportunities.
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