We can see it as a form of correction, Price contracts
what does this mean?
*From the TOP " Price makes lower highs
* From the bottom " Price makes higher lows.
The correction of point B is at 61.8 level.
and point D at 0.786 from XA
The idea is after a fall from X to point A, Buyers try to take the price back up, they only make it slightly above 50% level, at 61.8%
Sellers try to push it lower, they can not push it beyond point A ,
Buyers try again, but only can take it up to D which is still below X.
This buyers fail for second time to break above point X. gives momentum and confidence to sellers to take care of this and short fast.
Will you sell right at D ? too risky , unless you combine with price action
Would you sell once B is taken, and price closes below B point? Yes, this is possibly a good call, but watch out to not be too late also.
If we draw , we will notice X & A are on same trend and it is going down,
A & C on same trend and going up
when we get price squeezed like this, usually will be followed by explosive move. so keep an eye open.
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