Re: Ways to identify the bounce ASAP after a significant correction?
Hi,
I’m just wondering what are the best indicators / candlestick patterns / charting TA to look for when a support bounce occurs after a significant dip.
I was in short positions on both Sunday and Monday during the big BTC correction and obviously there were points where they were significantly in profit. However, I held on too long and closed after the bounce. I still took profit but feel I could’ve “taken the meat of the trade” a lot better.
What do you guys look for?
I’m just wondering what are the best indicators / candlestick patterns / charting TA to look for when a support bounce occurs after a significant dip.
I was in short positions on both Sunday and Monday during the big BTC correction and obviously there were points where they were significantly in profit. However, I held on too long and closed after the bounce. I still took profit but feel I could’ve “taken the meat of the trade” a lot better.
What do you guys look for?
A few ideas from the 4-hour chart:
High volume doji candles (particularly hammer or dragonfly candles) after a significant dump indicate capitulation, which is usually the end of a downtrend.
You can also look for multi-candle reversal patterns. In this case, we had a morning star reversal at the bottom: https://www.investopedia.com/terms/m/morningstar.asp
You can also look for pivot breaks. When price consolidates within a range for many candles then breaks outside the range, a trend usually develops.