Take note of the way that price approaches a level of support or resistance.

The more that price has to stretch to reach it, the better.

<image: When Price Stretches to Reach the Level>

This is a time to FOCUS.

Because if this move is unable to attract sufficient selling to continue lower, it can potentially set up a very nice YTC PAT BOF trade for reversion to the mean, or even complete reversal.

Like a rubber band stretched and released.

We discussed this concept previously in the following articles:

But it happens over and over again, so let’s look at another example.

Higher timeframe context first:

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

Let’s shift to the 30 minute Higher Timeframe chart as we’re about to open the session.

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

Dropping now to our 1 minute Trading Timeframe:

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

<image: When Price Stretches to Reach the Level>

Again, if the break can hold and if these prices can attract sufficient new selling, the market could push lower. My job will be to recognise this and seek BPB/PB opportunity SHORT.

But given the context, I’m keen to see the opposite occur.

I’m keen to see a lack of selling pressure, trapping any breakout shorts into a losing position and fueling a potential snap back higher for reversion to the mean. In other words, a BOF setup LONG.

Again… think of a rubber band stretched and released.

Let’s see what follows. Does the break of the prior day’s low bring in new selling pressure? Or has the move exhausted itself and potentially trapped the breakout shorts?

<image: When Price Stretches to Reach the Level>

The more that price has to stretch to reach an S/R level, the better.

<image: When Price Stretches to Reach the Level>

This is without doubt one of the best ways I like to see price set up a YTC PAT BOF trade from support or resistance.

Happy trading,

Lance Beggs

 


 

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7 Comments

  1. Hi Lance
    Are these price movements ( price stretches to reach an S/R level ) the same as the climactic moves to exhaustion point at S/R area or they are different?

    1. Essentially the same concept, although with less intensity and panic driving the move. A proper climactic move will involve a period of intense buying/selling panic and extreme volume.

  2. In the picture, the number of postions that was in stop loss is high. Please add the loss/profit of each order and total profit (with commissions) Or, if possible, please add the balance graph of this post .thanks

    1. Firstly, loss% (or win%) is irrelevant without reference to the win/loss size ratio as well, as both are needed to confirm positive expectancy. And I’m not sure if you actually followed the trade markers, but there was a 50% win rate (6W and 6L), which is within normal bounds.

      In this sequence of trades:

      12 entries (six trades with two parts each)
      Win rate = 50%
      Win/loss size ratio = 2.53

      P&L in points for each entry: +7.00 -4.25 -0.50 -5.50 +8.00 +15.75 -5.25 -4.50 +1.00 -5.50 +7.70 +25.75 points

      You can take off commissions as per your cost structure, but they should typically be <0.25 points per trade.

      I used to include this on charts in the past, but found it distracted too many people from the key message of the article. As appears to be happening here.

  3. Hello Lance,
    Great article 👍🏻 I find sudden, strong moves always to be curious and interesting as they bring emotion. And emotions bring great opportunities a lot of times! Recently I though about pull backs, and I think the ones that have a spike at the end move our trades faster to the profits for the reasons above. Anyway, the main point is to find a trader who has taken a low probability trade and use his order flow hopefully to move our trade to profits.

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