Renko Chart Trading During Price Consolidation

When we discussed renko trading charts for the emini russell, we looked at a swing that had some stalls, but was a 10 point price move where the renko chart indicator never reversed.

This was a great trade, and the next day there was an emini russell renko trade that was even bigger.  But what about renko charts during periods of price consolidation, how are those going to work for trading – here are my comments at the end of the previous video:

The key will be how these charts work during tighter swings or more extended consolidation and range periods, especially compared to the tick charts that we have always used.  I want to see whether the renko charts will help keep us flat during consolidation [and this is for any underlying they are used for], while giving entries and showing the transitions out of consolidation.

Using Renko Charts For Emini Russell Day Trading

Emini Russell Chart Consolidation

When we look at the emini russell renko chart and tick chart comparison, we will see 2 consolidation periods that broke out into continuation swings.

We will want to see 2 things:  (1) did the charts stay flat during consolidation or did they show trade setups that probably shouldn’t have been done for the market condition (2) did the charts give setups to trade the consolidation breakouts that were more than horizontal breakouts only – and if not, where was the first continuation trade setup.

I decided to trade using an emini russell 240 tick chart, with a renko .45 chart –this combination looks to be about the same span of time.

I was interested in seeing how this would work with a faster tick chart and a smaller renko brick size, specifically wanting to see:

• How many more trade setups would these charts give compared to the 360 tick and .7 renko charts
• Would this renko chart give more addon setups
• Would these ‘faster’ charts show more consolidation periods

This is the russell 240 tick chart:

• The period between the 2 yellow squares is the overnight session
• The last bar of the chart is 9:02 ct
• I would call the first 30 minutes a sideways range, if not consolidation
  • Do you see any trades that you would do this period
  • I wouldn’t buy anything in the area of yellow circle1 – that is a ledge breakout into the yellow line as resistance
  • I wouldn’t sell anything is the area of yellow circle2 – that is a range-consolidation initial reverse into the daily low as support
  • I did buy the green dot
    • Bottom 2 blue squares daily low double bottom
    • Reverse to the 2 top blue squares – shift line double top
    • Retrace to higher low with mex flow
    • Buy the green dot as a shift line failure breakout

Renko Chart Emini Russell Trading

Here is the renko .45 chart:

• You see the same daily period between the yellow square and right side of the chart
• You see the same yellow circles and the range initial reverses – there are no renko chart setups or trades that would have been done
• And you can see the 2 blue squares and the shift line double top
  • Buy the green dot as a shift line failure breakout

Here is the remainder of the buy swing on the emini russell renko chart, but first note the yellow dot1 sell setup:

• That trade would have been done at 5:30 before the day session opened and I didn’t do it
• But there is that midline reject with mex flow trade setup that I have come to like so much on the renko charts
• You can see the yellow dot2 buy setup has that same setup
  • Yellow dot3 was also that setup as a swing continuation trade that was done as an addon
  • And yellow circle2 gave the setup again
    • But you can see the yellow circle on mex flow and how extreme it had gotten – along with beginning to cross
    • The 240 tick chart never would have given that pre-open sell setup – nor did it give the addon setups that the renko chart gave

The 240 tick chart shows a consolidation period ended the buy swing – you are looking at around 45 minutes of consolidation, and do note that 18 minute right side box before the breakout.

• There is an interesting chart structure that shows a pmd-double top at the chart consolidation highs, with a double bottom at the consolidation lows
• But with that 18 minute consolidation into the breakout – I think that is a hard trade to take and think there is no trade setup –vs- a consolidation breakout

After the consolidation breakout:

• I couldn’t trade the yellow dot – that would be a chart read that was counter momentum into a pmd low
• I would probably take the red dot if I was flat – but I wouldn’t like the setup and again would see a consolidation breakout, but with some additional components
  • The trade will include the previous pmd low for breakout potential
  • There is a retrace to the blue square with the mex rollback
    • This is not a trade with mex flow – but there are signs of momentum resumption
    • Once short, there is nothing to do at yellow dot2 – including going flat
      • Regardless of the mex cross and ttm reverse – this would be directly into the daily low now as resistance
      • So definitely no buy – but if someone didn’t hold for resistance and went flat, they would have no swing resumption trade at the yellow circle

Now if we look at the emini russell renko .45 chart, it’s as if that consolidation period never occurred.  And then we saw the strength of the renko chart in a directional price move.

• This is a beautiful trade setup for my short sell:
  • Pmd high – chart reverse dot shift
  • Double bottom low
  • Retrace to the midline with mex flow
  • Sell yellow dot1 as a midline reject-triple bottom breakout with mex flow
  • Yellow dot 2 is a continuation setup that was done as an addon
    • Again the red-green-red brick midline reject
    • With mex flow – it hasn’t gone extreme yet

Although yellow circle1 and 2 again show the midline reject – I didn’t do any more addons

• Yellow circle1 does show the mex cross back even though it’s below the extreme line
  • But even if momentum was overlooked – I wouldn’t take a trade directly into the daily low as support
  • Yellow circle2 wasn’t considered as a daily low breakout – at this point there was a mex extreme cross

There is nothing to do on the mex cross renko indicator dot shift reverse – not into the daily low as resistance or into the daily low as a resistance double top

• Because of the chart pattern related to the double top, I never went flat the trailing initial short or addon short
• But if someone was flat, or if I exited the addon – yellow dot3 could be considered as a resumption sell
  • You would be looking at a combination resistance double top – renko dot shift back into sell
  • Back through the midline [hard to actually call this a reject]
  • Mex rollback

So, there is our first look at emini russell renko chart trading and consolidation.  The 2 periods were not an issue for trading the renko chart, but would have been hard with only the tick chart.

We will continue to look at different emini russell consolidation periods and the related trading using renko and tick charts.