Do you ever experience the joy that comes from watching a price sequence develop and feeling that it is just technically "beautiful"?
No? Maybe it's just me.
But I do really love this sequence.
And I think it is a good one for those new to the YTC Price Action Trader methodology who might still be getting used to the ideas of strength and weakness analysis.
Sorry for those who don't have the YTC Price Action Trader. This article won't be relevant. We'll get back to usual programming next week!
Here's the price sequence we're going to study:
Click here if you wish to open a larger chart image in your browser. Or right click to download.
Pattern traders call this a Rounded Top.
For me, it's a transition from Uptrend to Sideways Trend (very briefly) and then into Downtrend.
But what makes it great for review is the fact that the whole transition occurs in slow motion, with gradual changes from swing to swing, rather than a sudden and dramatic break of structure.
Price just rolls slowly over from Uptrend… to Sideways… and to Downtrend.
So… study time!
A primary aim in my own personal trading is to get "in sync" with the price movement. This is not just assessing the trend direction as up, down or sideways. But at a deeper level, aligning myself and connecting with the underlying bullish or bearish sentiment within the trend. The result being a strong sense for whether the trend itself is stable, or perhaps weakening, stalling or at risk of reversing.
The aim of this exercise: To start developing these same skills through studying a reversal price sequence, identifying the signs within the swing structure that could have helped you sense the trend weakening and rolling over eventually into a new downtrend.
Please note: (a) Our concern is NOT with how this structure might be traded. Just with keeping yourself aligned with price as it flows. (b) And while we recognise that we're missing the "feel" that comes from watching this occur live, there is still value for new traders in historical chart study. Knowing what to look for is step one. Then we progress to learning to see it unfold in real-time.
Let's go:
1. Examine the price swings as they move from start to finish, using only one single method of strength and weakness analysis at a time.
(a) Momentum slope – bullish swing comparison
(b) Momentum slope – bearish swing comparison
(c) Projection
(d) Depth
Take note of any signs that each method might offer, alerting you to a weakening of the uptrend and gradual rolling over into a downtrend. (Noting of course that not every swing gives clear evidence of change. You're looking for gradual changes across multiple price swings.)
Now let's try to make it a little more realistic…
2. Real analysis, conducted in real-time at the hard right edge of the charts, actually considers all methods of strength and weakness analysis as a whole. So this time, step through the chart swing by swing and let all four methods create a "picture" in your mind. Allow yourself to feel the uptrend weakening, rolling over to the sideways. And then again rolling over to a downtrend.
If you want to review the text first, refer to sections 3.3.1 and 3.3.2 (pages 113 to 144).
If you have a couple of hours to spare you may feel like replaying the sequence (NQ, 3rd June 2019). But for those of us with better things to be doing on the weekend, simply stepping swing by swing through the chart from left to right should provide sufficient learning opportunity.
Happy trading,
Lance Beggs