🌹 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 for a long time, suddenly the price begins 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 then the question arises: how can we ensure that this breakthrough is valid and not a false breakout? The market is very likely to reverse and return to the consolidation range again, isn't it? See the chart below 2⬇️
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So, one method is to wait for the price to pull back without breaking the previous consolidation area's high to confirm that this breakout is genuine. However, many true breakouts do not pull back, and we often see the price surge directly upwards, which can cause you to miss a very good buying opportunity. See the chart below 3⬇️
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Therefore, if the market really does not retrace, I will generally choose the second method, which is to use the pregnant line to confirm the effectiveness of the breakout.
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🌹2. What is a pregnant line?
The pregnancy line, also known as the mother-child line, consists of two K lines. The first, larger line is the "mother line," and the second, smaller K line is the "child line," which is contained within the mother line. Key point: only compare the highest and lowest points; whether it is a body or a wick does not matter. See the image below 4⬇️
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Uptrend: The left side of the chart indicates that bulls no longer buy further in the second phase, resulting in a small green candle; Downtrend: The right side of the chart shows that bears no longer sell further in the second phase, leading to a small red candle; The line after the mother line is immediately followed by the child line, indicating that both buyers and sellers in the market are hesitant, just like at a rest area on a highway, where everyone chooses to take a break and adjust before continuing their journey. 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 fluctuating market. See the chart below 5⬇️
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If the price breaks upward from the range of fluctuations 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 figure 6⬇️
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At this point, if the price continues to rise, it indicates that buyers still have the upper hand, and the sellers' attempt to push the price back into the range has failed. Therefore, the breakout of the candlestick pattern once again confirms the validity of this breakout from the 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, and then the price hit the resistance level for the fourth time and formed a breakthrough. See the chart below 7⬇️
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After breaking through the resistance level, a孕线形态 is formed, with the子线 being a small doji indicating that neither the bulls nor the bears have won, and the price begins to hesitate.
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Then there are two situations: (1) the sellers are stronger, and the price is pushed back to the original platform, 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 breakthrough 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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🌹4. So how do we participate in this transaction?
In general, Brother Liu tends to prioritize going long after a breakout, and observes when the price breaks above the highest point of the mother line when a harami candlestick pattern 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 it more clearly: see the chart below 8👇
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After entering the market, I plan to close half of my position when the risk-reward ratio is 2:1. The take-profit point for the other half of the position can be set 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?
Please remember: the market is not something anyone can predict in advance. We can only make trading plans based on existing observations. If the market trend does not align with our trading plan, we should decisively abandon it. One essential quality of a professional trader is to maintain patience and only wait for their own trading opportunities.
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