It looks like this -
Even though I call it the Return to 4 the price could actually drop through to the 8 or to the 21 - the method remains the same. In order to know that you have the real thing you must see the rebound candle and buy off the top of that. In the chart above and below that is the third candle in.
Frequently, as seen here, the RT4 is associated with a pivot level, in this instance it was resistance 1. After crossing back through R1 it rebound from the EMA 8 and passed through it again going up. This trip took it all the way to R4 before it started getting choppy.
As a little added value - note that a BOB formed just below R4 and it took off again for another great day trade opportunity.
This method works from minutes to months although you might not get a gap-up on the monthly charts. Instead what you will see is a long candle and then several short ones as the stock pulls back to the EMA 4, then it will rebound and away it goes.
Here you can see one forming between April and August of '06 - about the time that all of the bobbleheads on bubblevision were calling for a market collapse what was really happening was a RT4. Isn't it amazing?
