Price Action & Psychology - Traders Action Zone, Relat. Strength

12 thg 6, 2020

Hello !

Key points :

• Significant support zone : That zone has been significant since the stock market crash in March. It acted as resistance, aswell as a small consolidation area (02/06 - 03/06).
  
• It is showing relative strength : Considering yesterday's correction of the overall market, the behavior of individual stocks tell us how strong they are.
  
• Price rejection + volume : They day before yesterday, the stock gaps down a lot, triggers stop-losses and panic selling, but eventually, it got bought up (5 or 15 min chart).
  
• Traders Action Zone : To define that zone, I'm using the 30 EMA and the 10 SMA . Basically, the TAZ is pretty useful when stocks are trending. It defines a zone where the general trend resumes after a "breath-taking" pullback.
  

Traders Action Zone

As you can see on the left side of the chart, it is considered that whenever the 10 SMA is above the 30 EMA , we look for opportunities to go long and vice-versa. After some time, the price over-extends and retraces in the TAZ. Obviously, it should be combined with other signals, in this case what gives us a signal is the relative strength of the stock, aswell as the signficant zone.

Here's an example on SPY :



Thanks for reading and if you have suggestions or want to discuss the idea, just leave a comment, I'll be happy to answer.

***Disclaimer : This is not an advice to buy the stock. Please, be aware that trading is a matter of probabilities and that it only takes ONE trader to deny your trade.***