Supply takeout pattern
TLDR : Expect ranging , dip and then blast to orbit
For valid supply takeout pattern structure should have these components:
- clean stage 1 ahead of it
- does it have stage 2 (both of those stages are a must)
- does it have stage 3 (optional, but its a plus)
The most important stage 4 is a momentum takeout, or if not that, at least an obvious micro shelf buildup with offers soaked at supply.
The setups will vary on how they look; therefore, the grade of setup and potential of reward on it will also be determined from 3 "external" factors:
-consistency of symmetry -consistency of consolidation -the heaviness of one-sided order flow positioning (for example, very strong short / offers to position on the supply level of price).
The last leg move (the one where price breaks supply) should be very strong and possibly on solid volume, or at least it should form a micro shelf at the supply area, showing that buyers are constantly soaking up offers at supply. The tape should confirm strong buying at the ask, showing aggression of the market into offers. If the last leg is not strong, a trader should avoid taking a trade.
While this is usually a micro-pattern it can also be added to higher TF as long as it fits the logic. Above and within the supply zone (42-40k) we should expect to see a shelf forming (ranging). The ranging would confirm acceptance and as long as we see no candles closing below the supply area we should expect a bullish market attitude.
The areas I'm looking and focused on are 45k and 44.8k . If the bulls reclaim 45k for a sustained amount of time they capture the 200dma and the bull run could be considered on. If no attempt is capable of holding 45k then id consider this sudden rise in volume and price a dead cat bounce or something similar. Failure to remain in this area (43-45k) could send us down to 40k resulting in a stagnant drop into the low 30s and subsequently 20s.
For valid supply takeout pattern structure should have these components:
- clean stage 1 ahead of it
- does it have stage 2 (both of those stages are a must)
- does it have stage 3 (optional, but its a plus)
The most important stage 4 is a momentum takeout, or if not that, at least an obvious micro shelf buildup with offers soaked at supply.
The setups will vary on how they look; therefore, the grade of setup and potential of reward on it will also be determined from 3 "external" factors:
-consistency of symmetry -consistency of consolidation -the heaviness of one-sided order flow positioning (for example, very strong short / offers to position on the supply level of price).
The last leg move (the one where price breaks supply) should be very strong and possibly on solid volume, or at least it should form a micro shelf at the supply area, showing that buyers are constantly soaking up offers at supply. The tape should confirm strong buying at the ask, showing aggression of the market into offers. If the last leg is not strong, a trader should avoid taking a trade.
While this is usually a micro-pattern it can also be added to higher TF as long as it fits the logic. Above and within the supply zone (42-40k) we should expect to see a shelf forming (ranging). The ranging would confirm acceptance and as long as we see no candles closing below the supply area we should expect a bullish market attitude.
The areas I'm looking and focused on are 45k and 44.8k . If the bulls reclaim 45k for a sustained amount of time they capture the 200dma and the bull run could be considered on. If no attempt is capable of holding 45k then id consider this sudden rise in volume and price a dead cat bounce or something similar. Failure to remain in this area (43-45k) could send us down to 40k resulting in a stagnant drop into the low 30s and subsequently 20s.
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