Supply/Demand Stock Trade Breakdown (1)

Question:

I was wondered if along with my previous pending query you could let me know what do you think about this other concern, on your vast experience and extreme knowledge you maybe could give me a better recommendation,

On this Daily Chart, I could take the trade successfully but my concern is about what happened 20 days later, on March 27,

You can see that after the correction started the Market did not return to the green demand zone, instead it bounced from a higher position, around at the middle of the previous strong bullish move, specifically on $13.26.

My big concern is if there is a way to anticipate these situations, in order to get a second chance to enter on the stock.

A particular observation was that I tried to change the TIME FRAME at different days and the 3 Days TIME FRAME looks as shown below with a clear demand zone:

You can see that the top edge of the demand zone for 3 days TIME FRAME (horizontal blue line) matches with the point from where the previous correction ends and the second bullish swing started up, it’s a bit risky to take the trade on 3 days thinking due the big range of the demand zone for sure but I was thinking if maybe combining the 3 days demand zone with a daily zone or 30 minutes zones make sense to take the trade, maybe on 4 hour zone,

Here is how 4H TIME FRAME GRAPH look like, there is no demand zone to think on take the trade, maybe by looking any hidden sign on any candle I thought, so I really don’t understand why the market moved up from this specific point, standing from the side of the big boys and trying to understand why they stop the correction here, maybe it has no technical explications of course,

Here on 1H Time Frame:

Well, that’s all dear Liam, I would really appreciate your response,

Response:

Alright, let’s dive into your queries, Hector.

Regrettably, there’s not much you could’ve done to foresee if the price would return to a zone shortly after it was formed.

The best approach is to monitor key points of interest and observe how things evolve.

In this instance, a significant support level that emerged during the consolidation might have caused the price to turn before hitting the demand zone.

By examining the daily chart, you’ll notice that the price reversed thrice from 2243 in the preceding weeks, forming a support level. When the price dropped back towards the demand zone, it reversed almost exactly where this support level emerged. In hindsight, spotting this level could have guided your entry.

As for your previous email, I agree with you that volume matters. However, it’s not accurate in forex, rendering it useless for analysis.

If I were trading stocks, I’d certainly use it.

Yes, you should wait for the engulfing candle to form before you enter.

Although this might slightly cut into the overall profit

In this case, I think the reason the price turned before it hit the demand zone was because of a major support level that had formed during the consolidation. If you look at the daily chart, you can see that in the weeks prior the price had reversed from 2243 three times, creating at a support level.

When the price fell back towards the demand zone, it reversed almost exactly at the point where this support level formed.

So looking back, I think had you noticed this level you could have used it as an entry.

Question:

Thank you so much for the feedback, I was a little confused with this detail of ‘had reversed from 2243 three times’ that you mentioned below on the stock YPF, I wondered if you maybe could mark on the chart and send it to me for better understating,

Anyway I think you are referring to the old support on the past year 2018?  if so I would like to ask you why you would watch and old support taking into account that you posted on Forexmentoronline an article explaining that old technical levels are not quite relevant and important as recent technical levels, which I could confirm after several cases that this is quite true,

Despite that, if my memory serves me correctly, you explained on some article that we can use a second strategy to enter on supply and demand zones? if we miss the first, I can’t remember the article but I would swear that I read it from your page,

Response:

Yes, you must wait for the engulfing candle to form before you enter. Even though it’ll decrease the overall profit slightly it’ll increase the probability of the trade being successful, which makes up for it – at least it does, in my opinion.

100% AGREE,

I mainly use the reversal structure pattern when trading daily zones using the 1-hour chart. I don’t really use it for trading 1-hour zones on their own, because it doesn’t form that often. So I mainly just look for engulfs or pin bars to trade them.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top