Price Action & Psychology - Pullback after breakout, Trend
Hello !
Key points :
As I pretty much always do, I went back in time looking for major support and resistance zones. To do that, I switch to a line chart and I take a look at the 1-year timeframe, it's way easier to define the major zones.
This is what it looks like :
Getting back to our candlestick daily chart, we can see that we've had a breakout : very wide-range candle and spike in volume.
Stocks never go straight "to the moon" and after breaking out that much, they usually need to "rest" or "breath". It started by declining quite fast (see the wider red candles below resistance). Then it started slowing down, we can ultimately say that the counter-(down)trend is losing power.
In other words, sellers were in control, but buyers are coming back in, since the major trend is an uptrend, as the trendline shows. We saw some more "fights" between buyers and sellers during the last 3 trading session.
What tells us that the uptrend is pretty strong, are the wide-range candles we see going in the direction of the trend.
Finally, on the last trading session, we have a clear price rejection, with increasing volume.
My entry will be around the last close and I'm using the ATR (based on 9 days) indicator to get an idea of the average volatility of the stock. This helps me defining a stop loss.
I'm using the previous resistance as the first target for my trade. Considering the setup here, I can imagine the stock price breaking that resistance and making a higher high, but because I can't predict it, I'm going to take some profits at my first target, and then I'll work out what to do with what I've got left from there.
Thanks for reading and if you have suggestions or want to discuss the idea, just leave a comment, I'll be happy to answer.
***Disclaimer : This is not an advice to buy the stock. Please, be aware that trading is a matter of probabilities and that it only takes ONE trader to deny your trade.***
Key points :
- Significant support
- Pullback after breakout
- Wide-range candles in the direction of the trend
- Indecision + volume increasing
As I pretty much always do, I went back in time looking for major support and resistance zones. To do that, I switch to a line chart and I take a look at the 1-year timeframe, it's way easier to define the major zones.
This is what it looks like :
Getting back to our candlestick daily chart, we can see that we've had a breakout : very wide-range candle and spike in volume.
Stocks never go straight "to the moon" and after breaking out that much, they usually need to "rest" or "breath". It started by declining quite fast (see the wider red candles below resistance). Then it started slowing down, we can ultimately say that the counter-(down)trend is losing power.
In other words, sellers were in control, but buyers are coming back in, since the major trend is an uptrend, as the trendline shows. We saw some more "fights" between buyers and sellers during the last 3 trading session.
What tells us that the uptrend is pretty strong, are the wide-range candles we see going in the direction of the trend.
Finally, on the last trading session, we have a clear price rejection, with increasing volume.
My entry will be around the last close and I'm using the ATR (based on 9 days) indicator to get an idea of the average volatility of the stock. This helps me defining a stop loss.
I'm using the previous resistance as the first target for my trade. Considering the setup here, I can imagine the stock price breaking that resistance and making a higher high, but because I can't predict it, I'm going to take some profits at my first target, and then I'll work out what to do with what I've got left from there.
Thanks for reading and if you have suggestions or want to discuss the idea, just leave a comment, I'll be happy to answer.
***Disclaimer : This is not an advice to buy the stock. Please, be aware that trading is a matter of probabilities and that it only takes ONE trader to deny your trade.***
Penafian
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