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The teaching

Candle numbering is simple: 1 is an inside bar, 3 is an outside bar, and 2 breaks the high or the low of the prior candle. A 2 up breaks the high; a 2 down breaks the low.

A failed 2 up broke the high but closed red — buyers could not hold it. A failed 2 down broke the low but closed green — sellers could not hold it. In Strat-assist coloring, a failed 2 up shows a green body outlined in red, and a failed 2 down shows a red body outlined in green.

The failure is the information. A break that fails tells you the other side just took control at that level. The example in the original lesson is CVX on the daily chart.

Key points

• 1 = inside bar, 2 = breaks high/low, 3 = outside bar.
• Failed 2 up: broke the high, closed red.
• Failed 2 down: broke the low, closed green.
• A failed break means the other side took control at that level.

Chart & diagram