Why I decided to write about this signal was, because its time has come. We have been seeing too many inverse H&S and indicators’ giving a go ahead for long but the price is failing to confirm yet. This brief is from the book Trading for A Living by Alexander Elder.
Elder says this signal occurs when a reliable pattern or an indicator does not lead to the expected action and the prices move in an opposite direction. Alexander Elder names this signal, as The Hound Of The Baskerville, based on a famous story written by Sir Arthur Conan Doyle. In the story detective Sherlock Holmes was called upon to solve a murder case in a country estate. He found the essential clue when he realized that the family dog did not bark while the murder was committed. This meant that the dog knew the murderer, and that this was an inside job. The signal was given by lack of expected action-by lack of barking!!!
When the market refuses to bark in response of a good signal, it gives you The Hound Of The Baskervilles signal. This shows that something is fundamentally changing below the surface and it is time to get in gear with a new powerful trend that is developing.
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