I just want to share a quick followup to a comment made a fortnight ago, in the article: When Price Stretches to Reach the Level.
So let’s see the outcome.
Note the first leg down with two overnight gaps. Interestingly, the second gap has still not completely filled. And note the second leg providing one of the widest range bearish candles in months.
This is a somewhat common outcome from a grinding market. A market of reducing ranges and reducing volatility that relentlessly and stubbornly continues creeping higher and higher, lasting much longer than you typically expect.
When you find yourself in a grinding environment, there are two rules to keep in mind:
(1) Expect the grinding environment to continue longer than you expect. Treat any break lower as suspect, until proven otherwise.
(2) And when it does break lower, be prepared for it to go hard and fast. Again, until proven otherwise.
Why does a support after breaking becomes resistance?
Look to volume two of the YTC Price Action Trader, section 3.2.1, starting on P57. But in particular the discussion surrounding figure 3.5.