When you’re going down the leg there is nothing to look at but the leg that took you up. The leg up has interesting levels in between. This 1600tk chart describes the leg that took us to the previous high.
There has been distribution. We sell and bounce at 27.5, now in order to change the momentum to the upside, the market pops up the price as observed here. This is a common action. Then after the pop, it will attempt to test the previous support, in this case, it will be 27.5. As you know, when you test this level, if you fail to generate enough momentum on the up side, this 2nd test of 27.5 will fail and go straight to the next level of support at 26.25. Why do we want to see the market go down to 26.5? Because it can be considered as the start of the leg up. Very simple. OMG!! Am I predicting the market? Or is this an “edge”?! Can’t you just believe it is technical?!
As you can see in this 5min chart, at about, 18:00 hrs on the 28th, this was a level of support that helped us get to the high at 36.5. Distribution leads to where? Can it be any simpler? Now structurally, this huge distribution should take you back to 19.75/50 then 17.75/50. At each of those targets, you should pop up first try, then go down to the next.
Now what about the macd on the 5min? That macd suggested that we popped up on bullish volume. Is it significant volume? Compared to higher time frames, like 30min or hourly, not very significant, but a retest of 26.5 should produce a little pop because of the elevation gained just in this time frame. If momentum will turn and change here, you don’t want to see a retest of previous support on lower macd achieved on 1am est.
Voila! Now by this time, it appears that the 5min macd is still in process of cycling down, however, since this is the first test of this level, we will experience a pop. Then when we come back down, we should break through and continue the setup of the 5min macd cycling down. Where is the momentum helping this pop coming from then if 5min is more bearish?
Surely it didn’t come from a higher time frame. It must come from the lower time frame. And the response is purely technical on how the market will test a level and break it. The market does not do things on a whim, it does them technically. Your job is recognize them.