Let's continue where we left off, shall we?
We're still looking at the from earlier this week. As the days progressed, it's forming beautifully. Our pop was long and gruelling to babysit, which is why I gave up on it. That and I wanted to go play outside.
What's the ol' saying?
Bulls make money,
Bears make money,
Pigs get slaughtered.
The thought process here is to let the distribution play out, and to wait for the market come to us. During distribution setups we will often see sharp drops and then quick recoveries, these are often what you hear called "fake pops" or "fake drops". When in reality there is no fake anything, because a trade was exchanged at those prices meaning they really did happen and really are a part of the charts history... so it's not in the slightest fake. While all this faking is happening, what's really happening is the big boys are selling off their positions in chunks based off the liquidity available.
Think about this for a moment:
If the price is at a high, don't you think TONS of people are going to want a piece of that breakout they think is coming? Of course you do. But all of those buy orders give the big boys someone to sell off their position to. That's how they can dump it.
With this trade specifically we're waiting it out because although I'm confident on the short, I'm also confident and fully aware that momentum can shift on the way up. I want the price to go up so I can short it, but I also want to see it respecting the distribution setup and momentum before I enter any trade. Without these factors, the move isn't confirmed and then this turns into 100% gambling.
NOTE: if the price does respect levels on the way up this trade will most likely fail, so that's why we wait for the test. Some traders scale in to their position with situations like these, others should not trade it as it is again extremely high risk if you're not paying attention to the price action prior to the significant level.
I set a trade entry, stop and target thing for the first time to try and make this a little easier to follow. But again, for the third time... if the price action does not respect the distribution and confirm more of a divergence... then trying to short this is a stupid idea.
This is a just progression of the bigger move we've been taking about since last week. Enjoy the gifts!