Now remember in this example all the traders who either exited their
long positions or went short when the prior swing low was violated. If the
two-step price support parameters end up holding and the bulls regain
control, those who exited might buy to reestablish long positions, and
those who sold short should be buying to get out of an unsatisfying short
trade. This will hopefully drive up the prices and pay you on the two-step
pattern setup that you correctly identified.
The maximum stop on a two-step pattern setup is the same as that on
a price cluster setup (a few ticks above or below the extreme of the price
cluster). The initial price target for the two-step pattern is a bit different,
however. The initial trade target is always the 1.272 extension of the whole
zigzag, which is represented by the swing of b to e