Price has made a huge move lower during this current session on the daily price action chart of the ITF40 or the Italy 40 major stock index to where price is now looking to test a major daily support area.
Price in this market has been trading in a sideways ranging period for the last 2+ months after it had been trending strongly higher. If you look at the daily chart I have attached below; you will see that after moving out of the trend higher price hit a major resistance that it has twice tried to move above and breakout of.
This sideways range has very clear and obvious levels which is great for you as a trader. Ranging, consolidating, winding up and generally markets that are not in trends are the trickiest to trade, but if they have really key levels that are obvious to identify and trade within, then it makes it much easy to navigate and hunt trades as well as then manage those trades.
Now that price is moving into this major support level you can watch the price action and what the behavior of the market is. because price is in a range you can look to trade the market both long and short, keeping in mind that you also want to trade inline with the time frame that you are trading on, so if you move to a smaller time frame such as the 1 hour or even smaller and the trend is down, then you could look to trade inline with this trend. I talk more about this and how you can use it to your advantage here;
How to Trend Trade With Price Action
If price fires off bullish price action at this major support level either on the daily or smaller time frames such as the 8 hour, 4 hour or potentially smaller time frames you could look to get long. Another play could be to look to get short should price make a retrace back into the major daily resistance overhead around the 22892.95 area.
Daily Chart
Good to see a variety of indices being traded, I think they are also a great source of PA trades.
Just looking at that bullish engulfing bar, I’m guessing you didn’t take that one due to the overhead resistance being so close? (And also not that commanding, especially for a CT trade?)
Mike
Heya Mike,
yep that’s right.
Would have been asking for trouble trading a setup into that area. You are laughing once price is above it because price flips and goes from resistance to support and you are off and to the races, but facing a huge risk until that point and just not worth the capital risk to find out if it will break.
Johnathon