When Demand Zones Play ‘Bounce or Break’ – A 5 Minute Candlestick's Minute-by-Minute Drama!

Here’s a detailed minute-by-minute timeline of price behavior when a 5-minute candlestick interacts with a demand zone. This comparison highlights bouncing versus failing from the demand zone.

1. BOUNCING FROM A DEMAND ZONE  

-   Minute 1: Initial Approach  

  - Price slows down as it approaches the demand zone.  
  - Smaller-bodied candles with long lower wicks appear, signaling buyer absorption.  
  - Volume begins to pick up slightly, indicating interest near the zone.  

  - RSI/Momentum indicators show signs of flattening or slight divergence (e.g., higher lows in RSI).

-   Minute 2: Testing the Zone  

  - A wick penetrates into the demand zone but doesn’t close significantly below it.  
  - Bid-side volume increases on tools like the depth of market (DOM) or footprint charts.  
  - Bullish divergences strengthen.  

   - Market structure shows subtle bullishness, e.g., micro-higher highs forming on the 1-minute chart.

-   Minute 3: Reversal Signs  

  - A bullish engulfing or hammer candlestick forms on the 1-minute chart.  
  - Strong volume accompanies this reversal candle, signaling active buyers.  
  - Moving averages (e.g., 9 EMA and 15 EMA) start to converge or turn upward.  

  - VWAP holds the level or begins to rise, confirming institutional interest.

-   Minute 4: Confirmation  

  - Price closes above the midpoint of the 5-minute demand zone.  
  - Follow-through bullish candles form with rising volume.  
  - Microstructure shows a series of higher lows and higher highs.  

  - Implied volatility near the zone drops, indicating reduced panic or fear.

-   Minute 5: Continuation  

  - Price moves firmly upward, breaking resistance formed during the reversal.  
  - Momentum indicators confirm strength (e.g., RSI crossing above 50).  

  - Buyers dominate the tape, with fewer large sell orders showing.  

   2. FAILING AT A DEMAND ZONE  

-   Minute 1: Initial Approach  

  - Price approaches the demand zone quickly and with large bearish candles.  
  - Volume spikes aggressively on sell-side pressure, hinting at capitulation.  

  - RSI or other momentum indicators remain oversold without divergence.  

-   Minute 2: Weak Reaction  

  - A small bullish or doji candlestick forms near the zone but lacks volume support.  
  - Wicks form both ways, indicating indecision or absorption by aggressive sellers.  

  - On lower timeframes (e.g., 1-minute), a series of lower highs continues, despite a small bounce.

-   Minute 3: Deep Penetration  

  - Price pierces deeply into the demand zone with a long bearish candle.  
  - The candlestick closes near its low, showing little buyer strength.  
  - Volume spikes again, indicating panic-selling rather than support.  

  - Moving averages (e.g., 9 EMA and 15 EMA) remain in a clear downtrend.  

-   Minute 4: Demand Zone Break  

  - A strong bearish candlestick closes below the demand zone.  
  - Follow-through selling occurs immediately on lower timeframes.  
  - Implied volatility rises, signaling fear and heightened uncertainty.  

  - Market structure shifts bearish, with new lows forming and no significant pullbacks.  

-   Minute 5: Continuation of Breakdown  

  - The price falls rapidly below the demand zone, confirming its failure.  
  - Selling pressure increases with large red candles.  
  - Indicators like RSI or MACD show continuation signals (RSI < 30).  

  - Weak or no signs of buyer recovery, as support now becomes resistance.  

Monitoring price action, volume, and microstructure during each minute helps identify whether a demand zone will hold or break.