How to confirm a low of day break followed by continuation
Anthony Speciale here with Hawkeye Traders, and I hope you’re having a wonderful day.
Today, we’re diving into the critical concept of price breaking through a prior low, often referred to as a “breakdown.”
Understanding this can significantly enhance your trading strategies, allowing you to make more informed decisions with a greater degree of certainty.
Identifying Key Levels
The chart we’re looking at today is a 3-minute intraday chart of light sweet crude oil futures. While this example focuses on crude oil, the principles apply to any market and timeframe, whether you’re trading stocks, futures, forex, or cryptocurrencies.
First, let’s identify a significant prior low on the chart. You can see that price initially came down to this level, where buyers stepped in and drove it back up.
This tells us that at this point, buyers were more aggressive than sellers.
As the market approached this area again, we needed to be cautious of potential support or a failed breakdown.
Analyzing Trends and Volume
A quick look at the chart shows the highs are trending lower, indicating a downward bias. A valid trend line, constructed from multiple touches, confirms this direction.
The real insight comes from observing the volume. As the market pushed down to break the prior low, we saw an increase in selling volume.
This is crucial because it indicates that sellers are more aggressive, adding validity to the breakdown.
The Role of Aggression
Understanding market movements boils down to recognizing the aggression between buyers and sellers.
The market doesn’t move simply because there are more buyers or sellers; it moves because one side is more aggressive.
Increasing selling volume confirmed the sellers’ aggression, validating the breakdown.
Confirming the Breakdown
Let’s focus on the critical breakdown moment. Despite a surge in buying volume, the price couldn’t push back through what was now a resistance level.
This failure confirmed that the aggressive sellers were still in control. As a result, the market continued to move lower, offering a significant trading opportunity.
Practical Application
This example highlights the importance of understanding the relationship between volume and price action.
It’s not about finding a magical indicator; it’s about reading the market’s story through volume and price.
The Hawkeye tools simplify this process by clearly showing who the aggressive party is within each candle.
Join Our Training Webinar
To dive deeper into these concepts, I’m hosting a training webinar. We’ll explore the relationship between volume and price action, providing you with practical strategies to apply in your trading.
You’ll gain access to the Hawkeye Volume Indicators and the Volume Mastery Series, which will help you master these principles at your own pace.
Understanding how to confirm a breakdown using volume and price action is a game-changer. It’s not about being scared of a market move; it’s about understanding why it’s happening and acting confidently.
If you’re ready to enhance your trading skills and make more informed decisions, join me in the training webinar.
Click the link below to register, and let’s take your trading to the next level.
Click Here for Webinar Registration
I look forward to seeing you there!
Happy Trading,
Anthony Speciale
Hawkeye Traders
Big Energy Profits
