Lecture Notes: Rejection Blocks and Turtle Soup Patterns

Introduction

• Topic: Teaching 3.3 focuses on rejection blocks in trading.
• Key Concepts: Turtle Soup patterns, false breakouts, and how to identify them.

Turtle Soup Pattern

• Definition: A false breakout pattern where price violates old highs/lows followed by a significant movement.
• Observation: Seen in hindsight, difficult to predict without practice.
• Examples:
  • False break above a high, followed by a price drop.
  • False break below a low, followed by a price rally.

Key Skills in Trading

• Rejection Anticipation: Develop a skill to anticipate price rejection at new highs/lows.
• Higher Highs and Lower Lows: Understanding failure swings without seeing higher highs or lower lows.
• Distribution and Accumulation: Patterns occur at highs and lows.

Bearish Run on Buy Side Liquidity

• Example: Price action shows equal highs getting taken out, leading to a price drop.
• Significance: Recognizing distribution and accumulation patterns.

Bearish Rejection Block

• Setup: Ideal in major to intermediate-term downtrends.
• Pattern: Price forms highs with long wicks before declining.
• Structure: Focus on highest bodies and wicks for defining rejection blocks.

Understanding Candle Patterns

• Candle Analysis: Focus on open, high, low, and close, not just wicks.
• Distribution Recognition: Look for highest open/close for a bearish rejection block.

Trading Strategies

• Rejection Block as Order Block:
  • Selling: Option to sell at low of rejection block or on a stop below.
  • Stop Loss: Important to manage risk.

Bullish Rejection Block

• Setup: Ideal in uptrends.
• Pattern: Price forms lows with long wicks before rising.
• Structure: Focus on lowest bodies and wicks for defining bullish rejection blocks.

Trading and Strategy Application

• Buying: Enter above rejection block in uptrend.
• Profit Taking: Cover shorts at lowest open/close in swing lows.

Conclusion

• Practice: Analyze charts for rejection blocks and their effects on prices.
• Future Topics: More on entry techniques and examples.