So on the 4 hour chart you see that the price is at an area of sellers, it is near a resistance zone. The price can still move inside this resistance zone for a little bit, but the most common rule you in trading is: selling near resistance and buying near support.
There are also extra indicators that is telling us that the price may bounce back down from this resistance area.
1. The volume is making lower highs
2. The real bodies of the candlestick are getting smaller and smaller
But the question is of course how far is it going to drop? Well if the price is going to drop on the 4 hour chart, then it means that a double top is going to form on the daily chart. And if this pattern is completed, then we can expect a pretty big drop.
Of course it is smart to take out some profits, because we don’t know for sure if the price is going to complete the double top pattern on the daily chart.
- So for entry, you have to decide for yourself when to step in. Try to step in if you are fine with the risk/reward ratio.
- For stop loss I would recommend to put a stop at: 0.019276
- For profit targets
• I would take a small amount at 0.017535, cause this area would cause a little speed bump for the price that is going down
• I would take a decent amount at the support zone, which is between 0.015843 and 0.015515
• If the price is going below that support zone, which means that the double top pattern is completed, then I would use a trail stop, either manually or automatic.
There are also extra indicators that is telling us that the price may bounce back down from this resistance area.
1. The volume is making lower highs
2. The real bodies of the candlestick are getting smaller and smaller
But the question is of course how far is it going to drop? Well if the price is going to drop on the 4 hour chart, then it means that a double top is going to form on the daily chart. And if this pattern is completed, then we can expect a pretty big drop.
Of course it is smart to take out some profits, because we don’t know for sure if the price is going to complete the double top pattern on the daily chart.
- So for entry, you have to decide for yourself when to step in. Try to step in if you are fine with the risk/reward ratio.
- For stop loss I would recommend to put a stop at: 0.019276
- For profit targets
• I would take a small amount at 0.017535, cause this area would cause a little speed bump for the price that is going down
• I would take a decent amount at the support zone, which is between 0.015843 and 0.015515
• If the price is going below that support zone, which means that the double top pattern is completed, then I would use a trail stop, either manually or automatic.