From the above figure we can see that at lower levels a sudden drop in price leads on to a pull back rally. Although the pullback rally might or might not convert into a bullish trend, but it does move in the direction for some time. The effect of a good pullback reduces at higher levels, where a drop is continued and followed by a V shaped curve formation (Fri Jan 12).
A simple strategy could be to buy into
- sudden fall in stock (2-3 times the speed) followed by
- a drop in volatility and almost consolidation at the lower end of the first bearish candle.
- at support levels on the same time frame.
The above information can be correctly derived, only if we know whether we are closer to support or resistance. For example Wed Jan 11 could be considered a support or resistance. So on Thursday, if we are confused whether we are at Support or resistance, then we cannot take the right position.
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