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Hello,
Can anyone tell me the reason for this highlighted short on 31 july 2024?
Al always talks about not to trade counter to strong moves/channels unless they clearly topped or bottomed out.
The reasons to not take this short in my opinion:
- Very strong spike/channel, with almost no bears in sight.
- The are microgaps and consecutive bull bars closing on their highs.
- In the strongest trends countertrend bars always look the strongest.
- The relatively big bear signal bar doesn't allow for very low risk (stoploss).
- Doesnt really form a clean wedge (Al didnt even highlighted it as one). The last two pushes are much closer together than the first one, so it lacks symmetry.
- It doesnt look that overbought to me.
- No serious break of trendline.
- There are comparable situations where the day unfolds in a SPBT or a channel with at least 3 pushes which we didn't got yet.
- There isn't any clear resistance in sight in the form of swingpoints of previous days.
- The bear bar doesn't close the previous BO gap yet.
Reasons I can think of to do take this short:
- There is a lot of room between the price and the EMA, so from this point of view it is overbought and getting a bit closer to the EMA seems a reasonable possibility.
- It can still be considered as the open? And 50% fail during the open.
- Its a strong BO bear bar.
I'm happy to know what reasons I might have missed that overrule my other 9 reasons. Or maybe my 9 aren't as valid after all...
Hi Jeffrey
The move up is a bit steep, therefore climatic so it might need a pullback(a 2 legs correction)(it could also be seen as wedge; Bar 3, despite being a bear bar did give a push up). Bar 13 was a good looking BO bar but didn't have follow through, that might be a sign of exhaustion. The close of bar 15 was not immediately bought by the bulls increasing the chance that we could go a bit lower especially with close targets like the BO point (High of bar 1) the open or the ema.
Your reasons to stay long are valid but they might belong to 60% side of being correct. Other traders are happy to take the 40% side because they have different way to manage countertrend trades ( e.g. going for a reward many time the risk) taking the bet that will remain the high of the day, especially because we might still be in the opening range as you mentioned, where reversals often happen.
Thanks for you explanation.
It's sometimes mind breaking that I could take this short in a similar situation like this and then I find out later that he didn't take it. But I guess the devil is in the details and each case is different.
