Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

Price Action Discussion

On the forum, there is a thread where many traders including myself are sharing price action setups.  We know price action is subjective, and we know a lot of traders struggle with identifying and defining price action setups that work for them.

Below is the post that I made to the thread today.  I strongly encourage you to come check out the thread directly, and participate!  It is for Elite forum members only, so if you aren't an Elite member, you may wish to consider joining if learning about price action is of interest to you.

----

Here is my view from today. I didn't trade today, and didn't even see the market in real time, so this view reflects that. I really hate 'analyzing' a day where I didn't see it evolve in real time, because watching a bar form is as important (more important?) than where it closes.




We started with a big gap of 120 ticks or so.

The first hour there really was just one possible opportunity to short with-trend, the third bar is a failed HH. It made a HH but closed lower and closed near its low, that is usually a very bearish sign. The second red bar worked past a potential triple bottom area. The third lower close continued th bearish trend with a LL and LH.

The sixth candle, a higher close, was an outside bar -- making both a HH and LL. It closed with a lot of bullish strength, the close was very near the high of the bar. This is usually a bullish sign. My with-trend only rules would preclude me from taking this long, as price was well below the ema20 so I consider it "counter trend". A series of HH and HL followed, with the exception of bar 9 which was a doji with a LH and LL. It was quickly followed with a strong bull bar, again closing near the high, and right near the ema20 level.

The eleventh bar showed weakness. We made a HH yet closed quite a bit lower from the high. Candles with big tails and wicks are usually a good indication of strength and weakness at certain price zones. In this case, the Daily S2 level was right there, so if you believe in pivots you would say that this pivot area was keeping price at bay, preventing it from moving higher as more sellers came in.

The second hour began with a bang. The news quickly drove price down and looks to be a bearish engulfing bar. The second bar, a higher close, made a LL and a LH. The third bar, a lower close, was an inside bar. It closed very near its low, a bearish sign. The high was also near the ema20, so you could try to anticipate an ema20 bounce here.

The fourth bar was massive, over 100 ticks in 5 minutes. I wasn't home so am unsure if a news story propelled this activity or if it was just a lot of stops being run as we hit a weekly low on CL. The fifth bar was an inside bar that closed near its highs. The sixth bar was a lower close, it made a one or two tick HH but closed near its low. You can picture this as a bullish trap. Buyers who came in looking for a 1-tick breakout of bar four to enter a counter-trend long position were trapped into this, and propelled the move forward as the market turned back bearish on the sixth and seventh bars.

The eighth and ninth bars represented we started to see some buying enter the market as we entered a weekly low range. A successive number of HH's and HL's followed, right up to the ema20.

The third hour begins with the tap against the ema20 after a long successive number of HH's and HL's. The first bar shows some weakness, as it has a big wick and closed directly on top of the ema20. The second bar made a LH and a LL, and was only able to move 1-2 ticks higher than the open. This is quite bearish, especially when combined with the fact we've now closed below the ema20 and the trend so far today has been bearish.

The third bar continues the bearish trend with a LL and LH, again only able to muster enough strength to move 1-2 ticks higher than the open. The fourth bar is an inside bar, but with a close near its low it shows weakness. The fifth bar is a LH and LL again, but we start to see possible buying come back to the market as the bar was basically a doji. The sixth bar, a higher closing blue bar, made a LL by 1 or 2 ticks and quite possibly trapped many shorts who re-entered the market. When the sixth bar closed higher, and then the seventh bar made a HH and HL, any possible shorts were hurting but it looks like the strength quickly wained and we had heavy selling re-enter the market for bars 8, 9, 10, 11 and 12 -- all LL's and LH's.

The fourth hour starts with more or less a double bottom, but it made a HH and closed near the high, so this outside bar shows strength. I cannot take a long here due to it being on the wrong side of the ema20 for my tastes. The second and third bars show HH's and HL's. The fourth bar, a lower close, is an inside bar that closed near its high. The fifth bar shows a bit of concern to question strength, as price was unable to close above the ema20 and we're left with a tall wick and a close near the low. The sixth bar is an inside bar that closes near the high, right on top of the ema20. The seventh bar is again a great cause for concern for bulls, as we make a HH and a HL, yet the bar is an inverted hammer and has a very large wick and closes very near its low, again on top of the ema20.

Because of the weakness of the seventh bar, bar 8 is unable to move even 1 tick higher from the open, and makes a LL and LH, closing below the ema20 and setting up a nice re-entry short. Bar 9 is another LH and LL. Bar 10 makes a lower low by 1 or 2 ticks, but then closes near its high. Bar 11, a lower close, makes a HH and a HL so is not suitable to enter a short position on. Bar 12 is a LH and a LL, but is a higher close.

Hope you guys are benefiting from all my typing!

Please share your feedback and your views.


----

Mike

0 comments:

Post a Comment

Note: Only a member of this blog may post a comment.