High probability intraday bullish trade: Demand zone within(over lapping, intersecting) daily CPR

-
5 minutes chart of BTCUSD Coinbase

In the above chart a demand zone Rally Base Rally is created between the Central Pivot Range (CPR) levels — Pivot Point (PP), Bottom Central Pivot (BCP) - its a high probability demand zone and we can see candles rallying upwards from the demand zone.

High probability Demand zone within Central Pivot Range (CPR) levels

When a demand zone is created between the Central Pivot Range (CPR) levels — Pivot Point (PP), Bottom Central Pivot (BCP), and Top Central Pivot (TCP) — it signifies a confluence of support levels, which can strengthen the case for a potential bullish price reversal or continuation. Here's a detailed breakdown of what typically happens in this scenario:

Understanding the CPR Levels and Demand Zones:

1. Pivot Point (PP): The central price level calculated from the previous period's high, low, and close. It often acts as a key support or resistance level.

2. Bottom Central Pivot (BCP): The lower boundary of the central pivot range, representing a secondary support level.

3. Top Central Pivot (TCP): The upper boundary of the central pivot range, representing a secondary resistance level.

Demand Zone within CPR Levels

A demand zone within the CPR levels suggests that there is strong buying interest in this area, reinforcing it as a significant support region. This confluence of multiple support factors increases the likelihood of a bullish reaction.

Possible Outcomes

1. Enhanced Support Area: The convergence of the demand zone with the CPR levels strengthens the support area. This alignment indicates a high probability of the price finding support and reversing upward within this range.

2. Increased Buying Pressure: As the price enters the demand zone between the CPR levels, buying pressure is likely to increase. This is because the demand zone is a recognized area where buyers are willing to step in, and the CPR levels add additional technical support.

3. Potential Bullish Reversal: If the price was previously in a downtrend and it enters the demand zone between the CPR levels, this area could act as a strong reversal point, pushing the price back up.

4. Continuation of Uptrend: If the price is in an uptrend and enters this demand zone, it could act as a consolidation area before the price resumes its upward movement.

Trading Strategy

1. Entry Points:

   - Look for bullish reversal patterns (e.g., bullish engulfing, hammer) when the price enters the demand zone between the PP, BCP, and TCP levels. These patterns confirm buyer interest and potential price reversal.

   - Enter long positions near the lower end of the demand zone to maximize potential upside while minimizing risk.

2. Stop-Loss Placement:

   - Place stop-loss orders just below the demand zone to protect against further downside if the support zone fails to hold.

3. Profit Targets:

   - Set initial profit targets at recent swing highs or key resistance levels. If the price is in an uptrend, targets could be set above the recent highs.

   - Adjust targets based on price action and market conditions, potentially using trailing stops to lock in profits as the price moves higher.

Conclusion

When a demand zone is created between the CPR levels (PP, BCP, TCP), it enhances the significance of this area as a strong support zone. This confluence increases the likelihood of a bullish reversal or continuation, providing traders with an opportunity to enter long positions with a favorable risk-reward ratio. By carefully analyzing price action and confirming bullish signals, traders can leverage this setup to make informed trading decisions.

Comments

Post a Comment

Popular posts from this blog

100+ years of the Dow Theory and the Yerkes-Dodson Law

-
Image
The Dow Theory and the Yerkes-Dodson Law have an impact on today's stock markets based on human psychology in the following ways: 1. Dow Theory and Human Psychology: The Dow Theory, developed by Charles Dow and later refined by William Hamilton and Robert Rhea, is one of the foundational principles of technical analysis in the stock market. It is based on the idea that stock market trends are composed of three phases: primary trends (bull and bear markets), secondary trends (corrections within primary trends), and minor trends (daily fluctuations). Relevance Today:  The principles of Dow Theory still hold because they describe the behavior of market participants and the cyclical nature of markets. Investors continue to observe primary trends, secondary trends, and minor trends in the stock market. Technical analysts use these principles to make predictions about future market movements, and many traders and investors still find value in these concepts. Trend Following and Human Beh
Read more

Swing nature of price action

-
Image
While both Dow Theory and Elliott Wave Theory involve the concept of swings, they approach them in different ways, and the terminology and principles used in each theory may differ. Let's explore how swings are defined in Dow Theory and Elliott Wave Theory: Dow Theory Swings:  In Dow Theory, the concept of swings is related to the primary, secondary, and minor trends. The primary trend is the long-term direction of the market, while secondary and minor trends represent shorter-term fluctuations within the primary trend. Primary Swings: These are the major movements in the primary trend. In an uptrend, primary swings consist of higher highs and higher lows, while in a downtrend, they consist of lower highs and lower lows. Secondary Swings: These are corrections or counter-trend movements within the primary trend. In an uptrend, secondary swings are declines (lower highs and lower lows), and in a downtrend, they are rallies (higher highs and higher lows). Minor Swings: These are s
Read more