How to find local tops in a downtrendIn my previous post I published the idea of a massive bear market rally.
This idea is still in the books, however, it may take days if not weeks to play out (if it does)
As a result, it is important to spot local tops and re-balance lower (not just to maximize your profits but more importantly to avoid getting rugged)
When we started the daily, the main idea was that we will definitely wick below the daily open and into the body of the previous daily candle without erasing more than 50% of its gains
(I expected the wick to touch 19582 and it came really close, got an entry around 19600 - more about how to spot local bottoms in another post).
As for the local top, I was expecting it to be between the wicks of two recently printed candles that we haven't visited since they were printed.
Normally, I would look for candle bodies (textbook PA). However, I knew from recent price action that there were many stops around the 21k area so I looked for wicks instead (liquidity hunting).
The main idea was that PA will try to stop those who shorted the top of yesterday's wick as well as FOMO anyone who sold that yesterday's wick to buy back into the market (and get trapped at a higher price)
At the same time I thought that PA would not allow people who bought the top of the wick of 17/6 to sell (exit) without a loss.
My thesis was enhanced by the Distribution that took place in the Low Time Frames (More about Distributions in another post) as well as the liquidity hunt that happened before the rug pull.
This resistance worked like a charm. I am sure we will break it next time but first we need to go lower and find demand / exhaust sellers.
