Quick analysis on a textbook bullish "Power of 3" setup on ALGOUSDT
What is "Power of 3"
- Power of 3 setups occur when "smart/big" money is building a position and creating liquidity. Setups can be seen with bullish / bearish scenarios, today we will be digging into a bullish setup.
- While retail can enter positions as orderbook allows, smart money must use more complex methods to build a position. In a bullish scenario we can observe an accumulation zone, price will typically chop in a short range causing traders' bias/positions to flip flop, this is where smart money is building the bulk of their position. In the manipulation zone, price consolidates below a key broken point which will provoke seller/short interest, the added pressure allows smart money to further build the rest of their long position. Once smart money is positioned they want to provoke buyer/long interest (a reclaim of the broken S/R), this is where the expansion phase can begin. There is little to no resistance during the expansion phase because the bulk of short/sell pressure has already been absorbed, because of this, expansion can be quick and harsh.
This is just a very quick summary, I urge you to DYOR on "Power of 3" setups and come to your own conclusions/plan
My Plan for this scenario
- Enter long on a sweep of the manipulation/consolidation lows (i.e. 0.22 - 0.2180), or reclaim of the broken swing S/R
- T/P at 0.2750, however, a reclaim of the the monthly open will be key for confirmation of continuation. Reclaim 0.2750 and I will be eyeing further T/P toward liquidity at the broader range highs (marked on chart)
- Invalidation = clean break/close below range lows, or a breakdown on BTC
What is "Power of 3"
- Power of 3 setups occur when "smart/big" money is building a position and creating liquidity. Setups can be seen with bullish / bearish scenarios, today we will be digging into a bullish setup.
- While retail can enter positions as orderbook allows, smart money must use more complex methods to build a position. In a bullish scenario we can observe an accumulation zone, price will typically chop in a short range causing traders' bias/positions to flip flop, this is where smart money is building the bulk of their position. In the manipulation zone, price consolidates below a key broken point which will provoke seller/short interest, the added pressure allows smart money to further build the rest of their long position. Once smart money is positioned they want to provoke buyer/long interest (a reclaim of the broken S/R), this is where the expansion phase can begin. There is little to no resistance during the expansion phase because the bulk of short/sell pressure has already been absorbed, because of this, expansion can be quick and harsh.
This is just a very quick summary, I urge you to DYOR on "Power of 3" setups and come to your own conclusions/plan
My Plan for this scenario
- Enter long on a sweep of the manipulation/consolidation lows (i.e. 0.22 - 0.2180), or reclaim of the broken swing S/R
- T/P at 0.2750, however, a reclaim of the the monthly open will be key for confirmation of continuation. Reclaim 0.2750 and I will be eyeing further T/P toward liquidity at the broader range highs (marked on chart)
- Invalidation = clean break/close below range lows, or a breakdown on BTC
Trade active:
My Position:
Long Entry @ 0.2270 (Personal Tip: Always front run your entries and exits)
My thoughts:
- Price reclaimed the broken swing S/R, and *briefly* but successfully retested.
- S/R retest was front ran, which to me confirms it is an area of interest for buyers/longs (also where my personal tip comes in handy)
- A retest or a breakdown for a sweep of the lows is still a strong possibility, in fact I am expecting it (reasoning; momentum off the S/R bounce has come to a halt and is starting to consolidate). It's important to have a plan for either scenario.
My Plan
- if we retest S/R, we want to see a strong bounce off to put in a ltf higher high. This will confirm buyers are in control.
- if we consolidate at S/R I would be weary and consider reducing my position BUT not entirely closing it.
- If we breakdown below S/R I would close the position, take the small loss, and return to the original plan (ie; Enter on relcaim of S/R or a Sweep of the lows).
- If we dont retest and continue up, we look ahead to our target.
Long Entry @ 0.2270 (Personal Tip: Always front run your entries and exits)
My thoughts:
- Price reclaimed the broken swing S/R, and *briefly* but successfully retested.
- S/R retest was front ran, which to me confirms it is an area of interest for buyers/longs (also where my personal tip comes in handy)
- A retest or a breakdown for a sweep of the lows is still a strong possibility, in fact I am expecting it (reasoning; momentum off the S/R bounce has come to a halt and is starting to consolidate). It's important to have a plan for either scenario.
My Plan
- if we retest S/R, we want to see a strong bounce off to put in a ltf higher high. This will confirm buyers are in control.
- if we consolidate at S/R I would be weary and consider reducing my position BUT not entirely closing it.
- If we breakdown below S/R I would close the position, take the small loss, and return to the original plan (ie; Enter on relcaim of S/R or a Sweep of the lows).
- If we dont retest and continue up, we look ahead to our target.
Trade closed manually:
Closed remaining position @ 0.225, did not re-enter at the bottom range since BTC was showing weakness. BTC weakness triggered most alts to breakdown.
ALGO had a clean break below range low and two failures to break back above. Trade is invalidated.
ALGO had a clean break below range low and two failures to break back above. Trade is invalidated.
Per my plan, my position has been reduced significantly and I will look to add risk upon a reclaim of the S/R or a sweep of the lows. 🍿