Monday, May 27, 2019

Buy and Sell Zone Setup examples


Buy and Sell Zone Explanation

There are 4 criteria needed to form an intraday Buy or Sell Zone setup:
  1. Strong sharp break from a small candlestick base, or a breakthrough of a major price level. The break will show  a set of several candlesticks and  WRB's from the level.
  2. One of these the two patterns form. 1. A rally (series of higher highs/lower low candles) small base near the high after the rally (1 to 4 narrow range bars or inside bars to form the base) and rally again.The top of the zone is the break from the base and the bottom of the zone is the bottom of the base. 2. A V pattern. A Rally (series of higher highs/lower low candles), a pullback of one to three candles, followed by a base forming of 1 to 3 narrow range candles or one hammer candle, followed by a rally again (forming the other side of the V) The zone is formed around the base of the middle part of the V - the Hammer or small base of narrow range candles. I tend to use the prior red bar opening price before the green bar that leads the way to higher highs as the top of the zone (upside down V pattern is for a sell zone)
  3. Fresh test of the Zone: On a test of the zone, look to enter on the 1st entry back to the zone. The more test's of a zone the lesser the odds for a continuation and bounce.
  4. Risk/Reward: Minimal 2x reward offered to the next zone or resistance area  (zone .50 - looking for roughly 2.00 distance to the next level)
To form a zone with a Daily Chart price point break, I use the following steps below with the Daily, 15 and 5 minute chart to form a setup:
  • Daily Chart shows a WRB break through of prior price point on the daily chart putting the stock on the watch list for the next day. The daily chart below shows an example with the break of the low of 3 days prior.
  • Next step is to find a sell zone by examining the 30, 15 and 5 minute chart. Sell zone will be formed near the break point.
  • Below The 15 minute chart shows a clear break of the Daily Chart support and a V zone setup. (upside down V with the sell zone). I form the zone around the Daily break point, which in this case is the V setup. Stop is outside the zone on the other side of the break point on the daily chart.
  • Exit at 1.5R or end of day. Price reaches 1R can move stop to even. Price reaches 1.25R can move stop to plus .5R. 
DAILY CHART
 

15 Minute Chart

5 Minute Chart


ARMN: Intraday example of a Base and Break on the 30 minute Chart with an inside candle. Zone was tested 4 days later.


AG: Intraday example of a flat top Base and Breakout on the 5 minute Chart. Zone was tested the next day.


 BZUN Nice breakout on the Daily chart with the zone formed around the break line with the bottom of the zone the series of candle wicks. The next day price traded back to its buy zone. Enter in the zone with stop placed outside the zone or under the rising 240ema for a more conservation stop option.

FBHS: Nice breakout on the daily chart, Next day FBHS pulled back to its buy zone where the breakout occurred. Entry was above the break area on the daily chart, with the stop below the 240ema and whole number at 53. 

TRIP Gaps up and trades half way into its sell zone which was formed around a Daily Chart breakdown. The 15 minute chart shows the V pattern pullback at the break point and selloff. .

AEO Solid breakdown on the daily chart (left chart) Sell zone formed around the daily chart breakdown and small base of candles around the daily chart break point that continued the sell off.

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Disclaimer

I DO NOT MAKE RECOMMENDATIONS TO BUY OR SELL SECURITIES - I JUST POST TRADES I MAKE OR FIT THE RULES OF MY TRADING PLAN ON A DAILY BASIS. DO YOUR OWN DUE DILIGENCE - YOU ARE RESPONSIBLE FOR YOUR TRADES, INVESTMENTS, AND DECISIONS! ALL CHARTS COURTESY OF TRADESTATION, SCHWAb & TD AMERITRADE