Let’s take a look at how we trade a Bear Market Rally

The first ingredient is a well-defined and clear downtrend. That means Lower Tops and Lower Bottoms with a good slope and distance between them in other words a Bear Market.

As we see here, we have lower tops as T1 is lower than T2 and T3 and T4 and lower bottoms as B1 is lower then B2 and B3 and B4 showing a confirmed downtrend. Since a downtrend is more likely to continue than to reverse, the market is expected continue going down after its corrective upward move against the downtrend (rally).

Many traders use multiple ways to find a possible resistance level to short the market. Fibonacci, Gann, Moving Averages, Bollinger Bands, Channels, Trendlines to name a few. This results in just many possible resistance levels and you don’t know which is correct until after the market finds resistance. So why use them in the first place? Why not just let the price tell you that here there is a resistance?
This is my way of finding support and resistance levels – I want to see at least a large reversal candle – red one in our example or a swing in a lower time frame. Since showing multiple time frames on the chart here is a bit hard we will stick with the reversal candle method.

A bearish Aggressive Wave Entry (WE1) - refers to entering the wave after the first Bearish reversal candle following the upwards correction. In order to have a bearish aggressive wave entry, we need a confirmed downtrend (patterns 4 or 4A) with a score of 9 or 10 -

Action:

1.We wait for one Bearish reversal candle to close
2.An entry is executed if on the next candle, the price moves below the low of the bearish reversal candle
3.The low of the reversal candle identifies the entry price
4.The Stop loss is placed above the resistance level at (T0)

A confirmed Bearish reversal candle and high scoring trend are key to executing this entry