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:
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:
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:
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:
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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