Read the Price Action for any markets to understand Strength and Weakness

PRICE ACTION

Below mentioned are the things I look out for:

1: Slope of impulse move getting flatter
2: Candlestick bodies getting smaller on impulse moves
3: Slope of corrective moves getting steeper
4: Candlestick bodies getting larger on corrective moves

Slope of impulse moves getting flatter

5-1

Candlestick bodies getting smaller on impulse moves

5-2

Slope of corrective moves getting steeper

5-3

Candlestick bodies getting larger on corrective moves

5-4

 

Here are a few examples to help you understand…
Example 1:

5-5

a – Impulse move heading higher. This looks normal in an uptrend.
b – Corrective move heading lower, but the candle’s body size is increasing
compared to previous corrective moves. This is something unusual.
c – An impulse move which is short lived. A possible complex pullback setting up.
d – Corrective move that tested the previous low.
e – Impulse move going higher, which should lead to resumption of trend.
f – False breakout. Corrective move has large bodied candles, and is getting
steeper. This doesn’t look good.
g – A weak attempt by the bulls to regain control.

Uptrend is getting weak. Support comes in around 175, which is a strong line of
defense for the bulls.

I will look to go long or stay on the sidelines. No shorting at this point.
A break and close below 175 would be bearish with the completion of a head &
shoulders pattern. If this happens, I’ll look to short or remain on the sidelines.

Example 2:

5-6

a – Impulse move heading lower with a huge spike down (possibly due to news
event). Price continues trading towards the low.
b – Corrective pullback with small bodied candles. This looks normal in a
downtrend
c – Weak impulse move going lower. Where did the sellers go?
d – Strong corrective move going higher with large bodied candles. The trend is
possibly over and could transition into a range market.
e – Sellers came in and tried to push the price lower. If it breaks below the previous
low, the trend could resume. But it couldn’t.
f – Bulls taking control once more in an attempt to move towards the resistance
area.

Overall:
Bulls and bears are in equilibrium at the moment as both bullish and bearish
candles are of similar size.
I’ll look to short or stay on the side. No longs at this point.
If price breaks above the resistance area at 0.6900, then I’ll look for longs or will
stay on the side.

Example 3:

5-7

a – Impulse move heading higher which broke and closed above resistance.
Candle bodies are large, showing strong bullish momentum. Expect the trend to
continue.
b – False breakout as the price trades back into the range. Candle bodies are large,
showing strong bearish momentum. It doesn’t look good here. Last line of defense
comes in at the 91.00 support area.
c – Weak attempt by the bulls to push the price higher. The small bodied
candles show lack of strength by the bulls.
d – Bears regain control and push price lower, breaking the 91.00 support (this is
an impulse move lower). Large bodied candles show signs of strength by the
bears.
e – Weak attempt by the bulls to push the price higher. Again, it shows lack of
strength, with small bodied candles and a flatter slope.
f – One bearish candle wiped out the gains of the last 14 candles, with previous
support now turned resistance.

Overall:
The bears are clearly in control now, and I’m looking to short or stay on the sides.
No longs for me at this point.

Comment box