The Opening Clearing Bar: Flat Averages, Origin, and Confirmation

Video: The MARKET OPEN SIGNAL I NEVER IGNORE
Creator: Oliver Velez Trading
Original Video: Watch the original video
Difficulty: Advanced

The Big Idea

An opening power bar is more specific than a large green candle. The source combines relatively flat, closely spaced averages, a move originating near the 200-period average, and a bar that clears several preceding highs. The useful lesson is how these observations form a sequence, and how the entry timing changes the information available.

If you remember one thing: define the pre-opening condition before judging the opening candle. Do not let a dramatic later rally choose the setup for you.

Build the Watchlist Before the Event

The source proposes identifying stocks expected to open near a relatively flat 200-period average, with the 20-period average not far away. That is a preparation task. A stock can meet those conditions and still produce no qualifying surge after the open.

This distinction helps prevent selection bias. If you begin with the day’s strongest winners, many opening candles will look significant. Instead, freeze a watchlist of all candidates that met the pre-opening condition, then record which ones actually produced the clearing event, including failures and uneventful opens.

The creator describes this family of trades as exceptionally powerful. The supplied examples do not establish that comparative ranking or a statistical success rate. They provide a hypothesis about a combination of compression, location, and directional expansion that can be defined and investigated.

Turn Four Visual Ideas Into Observable Conditions

The source permits some slope and treats averages as areas rather than infinitely thin lines. That flexibility is useful visually but creates room for inconsistent labeling. The indicator supplies adjustable ATR-based definitions so the same rule can be applied across charts. Those thresholds are ours, not numerical parameters supplied by the creator.

Chart Session Settings Change the Averages

The lesson explicitly uses regular-hours data for calculating its averages, while observing premarket quotes separately for preparation. Adding extended-hours candles changes the observations inside a 200-bar average and can materially move the reference.

That is a methodological choice, not evidence that extended-hours transactions are unreal or irrelevant. The essential point is consistency: a regular-hours pattern should not be evaluated against an extended-hours average without acknowledging the change. On a regular-hours two-minute chart, the five preceding bars at the next open generally come from the prior trading session.

The indicator therefore requests a regular-hours chart and uses a New York opening window. It does not independently turn an extended-hours chart into a regular-hours calculation. This makes the requirement visible instead of silently producing a different study.

Anticipation and Confirmation Are Different Entries

The source describes entering during the latter portion of the first two-minute bar, sometimes as it clears the preceding highs. A separate confirmation entry occurs after that event bar finishes and another bar exceeds its high. Those decisions use different information and can produce different prices.

A completed two-minute bar cannot establish exactly what was visible twenty seconds before its close. Its final high, low, body, and close were not all known then. Drawing an early entry from the completed candle would give the historical decision future information.

The included indicator waits for the event bar to close. It marks a completed clearing event, not an intrabar anticipation entry or the later second-bar confirmation. That deliberate delay is the price of a reproducible chart rule using completed bars.

Worked Example: Adding on Confirmation Changes Risk

Consider an invented opening bar with a low at $74.80 and a bullish event close at $75.40. A protective reference at $74.78 creates $0.62 risk per share for an assumed entry at that close. One hundred shares would have $62 planned price risk before costs; the indicator itself does not fill an order there.

Suppose a later confirmation entry is $75.60 with the same protective reference. Another hundred shares adds $82 of risk. The combined position now risks $144 before costs. If the original maximum was $100, the successful-looking confirmation does not justify the full addition.

With only $38 of the original budget remaining, the raw additional size would be about 46 shares before costs and any other constraints. A new entry can be technically valid while being too large for the combined position. Calculate the total rather than treating each purchase as a separate permission slip.

Origin and Clearing Should Be Tested Separately

The source notes that a bar starting well below the 200 and extending through it may differ from one originating near it. Preserve that distinction in a worksheet. A bar can clear five highs while beginning far from the average; another can originate nearby without clearing anything.

If you combine every favorable feature immediately, you may get a tiny sample that looks impressive but reveals little about which condition mattered. Start with a broad clearing-event sample, then label origin distance and average state before seeing outcomes.

The same discipline applies to losses. A qualifying opening surge can fail. A proper stop is evidence of process discipline, but remains a financial loss. Do not remove it from the record because the initial setup looked unusually strong.

Pine Script Indicator

//@version=6
// Guide: https://candlechasers.com/market-open-flat-average-clearing-bar/
// Original educational indicator, not an exact reconstruction or a trading system.
indicator("CC Open Clearing Power Bar", overlay=true, max_labels_count=100)
if not timeframe.isintraday
    runtime.error("Use a standard intraday chart, preferably 2 minutes.")
if syminfo.session == session.extended
    runtime.error("Set the chart to regular trading hours to match this study's averages.")
window = input.session("0930-0932", "Opening window (New York)")
slopeBars = input.int(5, "Average flatness comparison bars", minval=1)
flatATR = input.float(0.15, "Maximum change of each MA in prior ATR", minval=0.01)
gapATR = input.float(0.5, "Maximum average gap in prior ATR", minval=0.01)
nearATR = input.float(0.5, "Maximum open distance from prior 200 SMA in ATR", minval=0.01)
powerATR = input.float(0.8, "Minimum body / prior ATR", minval=0.1)
bodyFrac = input.float(0.7, "Minimum body / full candle range", minval=0.1, maxval=1)
fast = ta.sma(close, 20)
slow = ta.sma(close, 200)
atr = ta.atr(14)
flat = math.abs(slow[1] - slow[slopeBars + 1]) <= atr[1] * flatATR and math.abs(fast[1] - fast[slopeBars + 1]) <= atr[1] * flatATR
narrow = math.abs(fast[1] - slow[1]) <= atr[1] * gapATR
near = math.abs(open - slow[1]) <= atr[1] * nearATR
span = high - low
power = span > 0 and math.abs(close - open) >= atr[1] * powerATR and math.abs(close - open) / span >= bodyFrac
priorHigh = ta.highest(high, 5)[1]
priorLow = ta.lowest(low, 5)[1]
inWindow = not na(time(timeframe.period, window + ":23456", "America/New_York"))
base = barstate.isconfirmed and inWindow and flat and narrow and near and power
bull = base and close > open and close > priorHigh
bear = base and close < open and close < priorLow
plot(fast, "20 SMA, chart session", color=color.blue)
plot(slow, "200 SMA, chart session", color=color.red, linewidth=2)
plot(priorHigh, "Prior five-bar high", color=color.new(color.green, 75))
plot(priorLow, "Prior five-bar low", color=color.new(color.red, 75))
plotshape(bull, title="Confirmed bullish clearing bar", style=shape.triangleup, location=location.belowbar, color=color.lime)
plotshape(bear, title="Confirmed bearish clearing bar", style=shape.triangledown, location=location.abovebar, color=color.red)
alertcondition(bull, "Bullish opening clearing bar", "CC: confirmed bullish opening clearing bar on {{ticker}} {{interval}}.")
alertcondition(bear, "Bearish opening clearing bar", "CC: confirmed bearish opening clearing bar on {{ticker}} {{interval}}.")
var table status = table.new(position.top_right, 1, 3, bgcolor=color.new(color.black, 15))
if barstate.islast
    table.cell(status, 0, 0, na(slow[slopeBars + 1]) ? "Load more than 205 bars" : "MA history ready", text_color=color.white)
    table.cell(status, 0, 1, inWindow ? "Opening window" : "Outside opening window", text_color=color.white)
    table.cell(status, 0, 2, "Flat / narrow / near: " + str.tostring(flat) + " / " + str.tostring(narrow) + " / " + str.tostring(near), text_color=color.white)

What This Indicator Shows

The indicator plots chart-session 20 and 200 SMAs and the preceding five-bar extremes. By default, the opening window is 09:30–09:32 New York time on weekdays. A qualifying completed bar must start within 0.5 prior ATR of the prior 200 SMA, follow a narrow and relatively flat average state, and have a large directional body. It then must close beyond the preceding five-bar extreme.

The close-through requirement is stricter than an intrabar wick crossing. SMA type, ATR normalization, flatness threshold, and body geometry are our definitions. Both bullish and bearish mirrors are displayed. Previous-bar averages and ATR define the setup context before the event bar develops.

What This Indicator Does Not Show

The code does not scan a watchlist, model premarket indicative prices, place a trade during an unfinished bar, or signal the later confirmation add. It has no stop, target, position sizing, or performance engine. It does not verify that the method is statistically stronger than other opening patterns.

Chart Setup, Alerts, and Validation

Paste the complete script into Pine Editor, save it, and add it to a standard-candlestick chart. Follow the timeframe and session instructions above. Configure alerts for the named condition using Once Per Bar Close. The code gates setup markers on completed chart bars; developing reference plots can still move while the current bar forms.

Allow enough history for every lookback and any higher-timeframe calculation. Inspect the visible references and status table before concluding that a quiet chart is broken. A restrictive filter can correctly produce no signals. Changing the chart session, timeframe, inputs, or available data can change the observations; create new alerts after such changes.

Validation status: code, state handling, confirmation timing, and HTML preservation were reviewed statically. The indicator has not been compiled or chart-tested in TradingView here, and alerts and browser copying have not been tested live. No orders, fills, backtest results, or performance claims are produced.

Practice and Research

1. Clearing contribution: collect the prequalified opening bars and label whether they close beyond five prior extremes. Compare follow-through without excluding failed clears.
2. Origin distance: compare proximity thresholds of 0.25, 0.5, and 1.0 ATR while holding the other definitions constant. Look for a stable relationship rather than one perfect cutoff.
3. Timing exercise: use genuine lower-timeframe replay to document an intrabar anticipation rule separately from the close-based marker. Never move the marker backward using the finished event bar.

Use standard two-minute regular-hours equity charts and load more than 205 bars. At other timeframes, the opening-window and five-bar lookbacks describe a different experiment. Record that change explicitly.

Check Your Understanding

Does a large opening bar alone qualify? No. This framework also evaluates average state, origin, and clearing.

Why can extended-hours settings change the result? They change which bars enter the averages and prior-extreme calculations.

What happens to risk when you add higher with the same stop? Risk per added share increases; the combined position must still fit the budget.

Final Takeaway

Prepare the context before the open, identify the completed clearing event honestly, and calculate combined risk before adding. The next useful question is which feature improves a consistently collected sample.

Risk Disclosure

This material is for education and research, not personalized financial advice or a recommendation to trade any security, contract, or account program. Trading can result in substantial losses. Leveraged products can produce losses beyond the amount initially committed, and short selling can involve unlimited loss. Options carry exercise, assignment, liquidity, and expiration risks. Stops and displayed prices do not guarantee execution; gaps, spreads, slippage, fees, funding, halts, and platform interruptions can materially change outcomes. Hypothetical examples, historical charts, indicators, and creator-reported results do not establish future performance. Understand the instrument, account rules, and total exposure, practice before committing capital, and use only risk capital you can afford to lose.

CandleChasers provides independent educational analysis and is not affiliated with, endorsed by, or sponsored by the source creator, platforms, or firms discussed.