How to Trade Run Away Type of a Rally in a Smart Way?

When a trading day starts from a strong breakout move cutting through resistance levels on multiple timeframes the best way to find an entry is to wait for the first micro pullback on a micro 3 min timeframe.

The regular trading session at 9–30 AM EST on Thursday started from a breakout over a cyclical resistance:

15 min chart of ES-mini, 26 May 2022

Those red lines are resistance levels automatically plotted by the CAT Cylce Indicator. Normally price respects those resistance levels and turns down after a new red line is printed on a chart.

Price normally breaks over a cyclical resistance when there are several up cycles pushing price higher on several timeframes at the same time:

60 min chart of ES-mini, 26 May 2022

As you can see above, ES broke over the resistance on 60 min timeframe as well. Moreover, the price broke over resistance on 120 min timeframe:

60 min chart of ES-mini, 26 May 2022

When such a breakout happens, you can either buy right away or join the bulls’ party in a smarter way.

In situations like that when a day starts from a strong breakout, I recommend traders to switch to 3 min charts and 5 min charts and wait until the CAT Cycle Indicator detects a micro pullback. That micro pullback would be a smarter way to go long and make money on a rally that normally keeps extending until late afternoon:

3 min chart of ES-mini, 26 May 2022

As you can see on the 3 min chart of ES-min above, the indicator caught two micro pullbacks and produced alerts “Buy PB”. Both alerts worked out really well.

Read more about the Cycle Trader Indicator here.

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Important Disclaimer

Neither the author nor the publisher of this article is registered as an investment adviser nor a broker/dealer with either the U. S. Securities & Exchange Commission or any state securities regulatory authority. Readers of this article are advised that all information presented here is solely for informational purposes, is not intended to be used as a personalized investment recommendation, and is not attuned to any specific portfolio or to any user’s particular investment needs or objectives.

Trading stocks, options, or futures carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience. The author provides general overview of trading methods that does not take into account your objectives, financial situation or needs. The content of this article must not be construed as personal advice.

Past results are not indicative of future profits.

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MonkeyMakesMoney

MonkeyMakesMoney

Monkey Trader uses Premium TradingView indicators to get an edge over millions of other traders