Reversal Pattern using CCI, Stochastics, Divergence, SR level
Reversals either direction often occur on these conditions:
- The CCI ghost with a cross of the 100 level.
- Support/Resistance: BB cluster or any other strong SR level.
- Divergence: in this case price vs. Stochastics AND CCI
First entry should only be a scalp; wait for retest and clearing of next S/R to take a trend type entry.
Reversals are always tricky to trade; be prepared to bail at any sign of continuation of the trend.
The following user says Thank You to Saroj for this post:
very funny... having 4 BB's definitely clutters up the price panel... but you get used to knowing what is important to look for... just like in traffic.. you have a general awareness of all of it, but are focused on the important things.
I don't Kirk... AIAO on 2 or 3 contracts for 3 ticks... then wait for the retest to do a full trade... rather than legging in, I'm more likely to enter 1 at the price at the trigger, then a limit lower and a enter stop order above a resistance area.
ZN did two perfect reversal patterns today per the above... one at the start of the down move at 0234 ET and one at the start of the UP move at 0906... the BB's, CCI (ghost), and Stochastics all showed that highest probability was for a reversal... the essence of it is indicators at extremes at SR levels with a weakenng/failure pattern on the CCI. Other indicators like MACD & RSI would likely have shown the same thing.. I happen to be familiar with these.
As described in the first post, you scalp the first move - the CCI TL break - (wave 1) and keep a runner on the 2nd - the CCI ZLR/famir - (wave 3). Since wave 3 is often a complex wave (having 5 waves in itself), you can also reload your position on the pullbacks if there appears to be enough room before the next SR level.