Dow Jones – Price action and three trades

First off- this is a 15 min chart the gray line to the left indicates the start of this week. The levels to look for to the low side is 24.940 and if price breaks back into the larger trading range, then the lows are at 24420 area. To the upside I will look for resistance at 25330 area, and higher at 25784. Remember, it is areas to look for price action setups. The setup might form a bit above or below or right in the area.

Later in this article I will explain the 50% retracement and expansion, witch is a tool I look at often. And example of when I drop down and look at the 5 min chart.

This week price opened in a minor trading-range into support. From here there was a strong rally to 25.000. It faded out and the correction took price back to support. Big rally followed by a large drop often leads to sideways trading. And i drew in a trading range in blue on the chart. Price made a weak bull leg from a double bottom. This is the first point in the bull trend channel drawn in black. There is a lot of money to be made in these small swings in the bull channel. It is easy to get trapped though, so I always trade these areas carefully. When price reached the high of the trading rang, at the first red arrow, price was also at the high of the bull trend channel. Price bounced of the channel and traded sideways until today, where price made a so far, strong breakout to the upside.

When trading the smaller swings inside the before mentioned bull channel, I like to drop down to a 5 min time-frame to get a better risk reward. Here is the three trades I marked from yesterday on a 15 min chart. In the left of this chart, price is trading sideways in a trading-range. The price-range of this trading-range is from the purple line to the red line. A 100 % expansion of this price-range is up to the blue 0.00% line.This area is also prior major resistance. The signal bar is a two bar micro double top sell signal. And the entry is below the bear bar at 1. The 2 trade is a second entry short breakout pullback sell signal, and a lower high. The 3 trade is also a second entry short, but the low of the bar is all the way down at the prior low. Because of this I would skip this trade on the 15 min chart.

On the 5 min chart. The 1 trade is a clear double top outside down bar. The bar is larger than the two preceding bars. After the 1 bar, there followed a inside bar. Below this bar was my sell entry. The first bear push was a two legged push to the purple 100 % line. Now price made a nice three push pattern to the 50 % correction area and a nice bear bar second entry sell signal. Pretty price action if you ask me. Now get the bear channel in place. Price moved in a new two leg near push to the expected channel line and confirmed it. After that there was a longer correction phase. Still at the trendline and the 50 % correction I got another sell signal. This time price did not make a significant new low and startet trading sideways.

When price is choppy on the 15 min chart, I like to drop down to the 5 min chart and trade for less pips. The hard thing is to wait for the larger 15 min pattern to get to the area of interest before dropping down to the 5 min. Look for 50 % corrections to match up with other price patterns.


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