🔥 Pregnancy Line Diagram Teaching ⬇️ Confirm Pregnancy Line Entry 👇

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1. Confirmation of pregnancy line
Imagine a consolidation range where the price has been trapped within the range 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 upward and enter an uptrend. See the image below 1⬇️
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But at this point, the question arises: how can we ensure that this breakthrough is valid and not a false breakout? It is very likely that the market will reverse and return to the consolidation range again, isn't it? See the image below 2⬇️
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So, one way is to wait for the price to retrace and not break the previous resistance level to confirm that this breakout is genuine. However, many genuine breakouts do not retrace, and we often see the price rally directly, which can cause you to miss a very good opportunity to go long. See the figure 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 pregnancy line is also known as the mother-child line: it consists of two K lines, the first larger one is the "mother line" and the second smaller K line is the "child line", with the child line being contained within the mother line. Key: just compare the highest and lowest points, the body or the shadow is not important. See the diagram below 4⬇️
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Uptrend: The left side of the chart indicates that bulls are no longer buying further in the second phase, resulting in a small green candle; Downtrend: The right side of the chart shows that bears are no longer selling further in the second phase, leading to 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, much like a rest area on a highway, where everyone chooses to take a break and adjust before continuing the journey. At this point, everyone should understand the concept of the pregnant line chart and the reasons behind 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 through the oscillating range upwards and a pregnant line appears, it indicates that buyers and sellers are beginning to hesitate and the market is in a state of rest and adjustment. Figure 6⬇️ below
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At this point, if the price continues to rise, it indicates that buyers continue to dominate, while sellers' attempt to push the price back into the range has failed. Therefore, the breakout of the engulfing pattern once again confirms the validity of this breakout from the consolidation range, and subsequently, the price continues to rise.
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🔥Third, let's go back to the real chart to show you an example:
On the 15-minute chart of GBP/USD, the market failed to break through the resistance level three times, and 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 pregnant line pattern forms, with the child line being a small doji indicating that neither the bulls nor the bears have gained the upper hand, and the price begins to hesitate.
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There are two situations that could follow: (1) The seller is stronger, and the price is pushed back into the original range, indicating that this 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? See Figure 7⬇️
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The market has chosen the second scenario, where prices continue to rise, thus the breakout is valid and not a false breakout.
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🔥Fourth, how can we participate in this transaction?
Generally, after a breakout, Brother Liu prefers to go long first and observes 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 previously untested resistance level, or you can also use a trailing stop to protect your profits. Let me show you 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 current observations. If the market trend does not align with our trading plan, we should decisively abandon it. A very important trait of a professional trader is to maintain patience and only wait for trading opportunities that belong to them.
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