Just some food for thought - At the high prior to the label A, you have what I call the LRH - last reaction high. This point is where there was still supply sufficient enough to again push price down to a new low in the lowest blue box.
Once demand is sufficient enough to consume the sellers/supply at the point labeled "1" [I call this engulf], price will be free to move up to at least the next LRH which you marked in your top blue box. The trick here is then finding an entry. For me this likely would have been during the WRB into your bottom blue box where you correctly exited your scalp short, but in general I look to the source of that engulf. In this case, the source of the engulf, the source of the demand sufficient enough to break that LRH, is down in your lowest blue box.
This sequence doesn't work all the time, but the odds are enhanced if there is: a) larger bar interval support beneath your lower blue box (I like the 30M or 1H chart) b) larger bar interval is in progress of completely a similar process as described above.
I will watch a 30M chart for example, and if the LRH on a 30M chart has been engulfed, we would expect price to then seek at least the next LRH on the 30M chart following a retrace to lower prices where demand will again be more prevalent. At that point, when we get down to a point where demand will again be prevalent from the 30M traders, you can find a high probability price sequence on the 5M chart (as shown above).
Hey George -
ReplyDeleteJust some food for thought - At the high prior to the label A, you have what I call the LRH - last reaction high. This point is where there was still supply sufficient enough to again push price down to a new low in the lowest blue box.
Once demand is sufficient enough to consume the sellers/supply at the point labeled "1" [I call this engulf], price will be free to move up to at least the next LRH which you marked in your top blue box. The trick here is then finding an entry. For me this likely would have been during the WRB into your bottom blue box where you correctly exited your scalp short, but in general I look to the source of that engulf. In this case, the source of the engulf, the source of the demand sufficient enough to break that LRH, is down in your lowest blue box.
This sequence doesn't work all the time, but the odds are enhanced if there is:
a) larger bar interval support beneath your lower blue box (I like the 30M or 1H chart)
b) larger bar interval is in progress of completely a similar process as described above.
I will watch a 30M chart for example, and if the LRH on a 30M chart has been engulfed, we would expect price to then seek at least the next LRH on the 30M chart following a retrace to lower prices where demand will again be more prevalent. At that point, when we get down to a point where demand will again be prevalent from the 30M traders, you can find a high probability price sequence on the 5M chart (as shown above).
Hope its of use, if not, disregard!
John! thanks for this! Great observations and tips, all makes sense, going to keep an eye out for it.
DeleteFYI You might have some Q's coming shortly ;-)