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Because you are in a downtrend from yesterday afternoon, and the market was weak with supply, an upthrust, and no demand on the 3-min chart.
You will think I sound like a broken record, but you must look at higher time frame charts. Again, what you thought you saw on the 3-min chart does not give the full picture of the structure of the market.
The attached chart is a 30-min chart which includes overnight data. The red arrow is where you wanted to go long. It is pretty clear we were in a downtrend all night long after putting in a lower high yesterday afternoon. The only relevant support around the open was yesterday's low. The lines drawn on your chart were illusory because of the limitations of the time frame.
When I look at support and resistance, I look for the obvious. I don't use Fibonacci numbers, pivots, MP value areas, etc. Some people seem to use these well, but I personally just keep it simple and think about nearby daily highs and lows and the hourly highs and lows, if relevant. If the day before had an especially active area (volume), I will note this too, as it may be tested today or tomorrow (and this is probably like MP). That's about all I do for S&R.
I also think about S&R as magnets. Traders will go and test these areas all the time. If I am short and there is an obvious support area nearby (like this AM), I look for a test of that support. The more obvious it is, the more confident I am about the target. If everyone can see it, they will usually go for it. Of course, I will buy support and sell resistance when it is appropriate to do so with confirmation whenever possible.
Hope this is helpful
Eiger |
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Yes it's helpful, but two things:
(a) I couldn't call it a selling climax if we weren't in a downtrend, so yes I noticed that, but selling climax & re-tests have to occur in a downtrend by definition.
(b) My line is about the same as yours around 1342. Indeed from yesterday's low, but that's also the high on the 19th. And when price breaks resistance this usually acts as support, so this was another reason for me to consider 1342 important support. I don't see it illusionary because it looks to me as if you've drawn the same line right?
I agree, S/R tend to be magnets. Which I why I take longs off support and shorts of resistance, I don't like trading in mid-air.
But 1342 seems to act as support after the open, price bounces off there. And then later on, I thought I noticed a re-test...
I'm not quite sure how the fact that we've been in a downtrend invalidates the setup though.