Tip #8. Measure the depth of a swing
How far does a stock move into the prior swing? More than halfway or less? The answer to these questions are important because it can determine the future direction of the stock. Let me give you an example:
The price action moved about halfway down (arrow) into the prior swing (dotted line). This is good. If it retraced more than that, you may want to question the validity of the move. This is because a stock in a strong trend should not retrace more than halfway into a prior swing. It should encounter buying pressure sooner than the half way mark. And many times stocks will reverse right at the halfway mark.
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