Monday’s emini-Dow session offered two great examples of the higher probability way of trading a reversal at S/R, when price accelerates into the area.
The examples occurred on the 10 tick chart, which I’ve been using as my lower timeframe lately, however the concept is applicable on all timeframes and markets (provided they offer suitable liquidity for trading).
Acceleration is easy to spot through the angle of price movement, although other features can assist in identifying acceleration into S/R. Often it’s associated with a large increase in volume; and you’ll usually see a dramatic increase in “daylight” (the gap between the price bars and the moving average).
In these two examples, price was moving down towards the 11355 support which is also the high point of price action from the prior Thursday.
Fading the strength associated with this acceleration usually offers a lower probability opportunity, despite the fact that it occurs at an S/R level. It’s usually better to wait for a second chance entry, as price retests the level and again fails to break S/R.
Entry is taken on a break above the stall on the second test. Stops are easily positioned below the price action lows and/or area of S/R. Targets… well it depends on your strategy.