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This pattern is slightly less reliable but still generates good signals. The logic behind it is that a breakout of trend line shows a change in the momentum of price, therefore a good signal to enter in the opposite direction.
There are other patterns in Woodies CCI system, such as the ghost (which is similar to Head-and-Shoulders pattern), and the HFE – Hook from Extremes.
The idea of the Hook from Extreme pattern is that the Commodity Channel Index reaches an extreme level, such as 200, -200, 300 or -300, and reverses. This is the beginning of a trend reversal therefore we can enter a counter-trend trend when the pattern occurs:
The logic behind this pattern is the overbought\oversold nature of the Commodity Channel Index. When it starts to reverse it is a sign that price is too high or too low, and begins to correct this deviation. In this moment we enter counter-trend to profit from the reversal.
The Hook from Extreme is another good pattern that generates very good signals.
In conclusion, Woodies CCI system is a very powerful system that when mastered can generate good signals in Forex, Eminis, Stocks and Commodities. If you’re a beginner in trading and don’t have time to learn a lot about Forex Indicators we highly recommend this system.