Pierce and Fail - Trade Book (Work In Progress)
Description:
Pierce and Fail is a Trend Reversal Setup characterized by a Breakout through a Major Level of Support/Resistance with High Relative Volume, followed by a change in Sentiment and Momentum back through the Level as the Trend Inventory is Exhausted and must return to Value Areas to gain new inventory.
Purpose:
Reversal Strategy to use both as a Aggressive Scalp Trade with strong Risk/Reward (R/R) along with potential to Trend against initial entry.
Using Volume Signals to help justify Entry and Stop Loss Area compared to arbitrary concepts that are not definite.
Clear Risk/Reward; Quick Trade with Potential for Large Reversal.
Observation:
Kept observing stocks start by forming a Morning Range; once Range was broken (and retested), stocks tend to go in search of value.
Stocks that have Higher Time Frame Trends and/or Ranges may have Intraday Transitions to Levels that provide signals for Reversal Strategies with a high R/R Probability.
Concepts:
Levels - Support and Resistance, Areas of High Interest based on prior Price Action
Ex. Daily Levels (HOD/LOD), Inflection Pivots, Premarket High/Low, Whole Numbers, etc
Ranges
Support and Resistance Zones defined by Price Action moving between each Zone
Transitions
Moving from one Range to another, defined by a Low Volume Zone between Ranges
Time Frame:
30 Minutes after Market Open until One Hour Before Market Close
Indicators:
Extended from 9 EMA on 5 Minute Chart
High Volume Event(s) at Major Level
Breakout is not sustained, Level 2 and Time and Sales shows Opposite Sentiment
Confirmations:
Reversal Candles on Smaller Time Frames
Engulfing
Pin Bar
Wide Range/Resting/Pierce and Fail (Name Pending)
Entry Signal:
Price moves through Level on High Volume
Sets a High/Low of that Breakout
Returns through the Level (Level 2 and Time and Sales are showing Opposite Momentum to Trend)
Entry at Level
Stop Loss:
Slightly beyond Breakout Price to avoid getting 'tagged'
Target:
Depends on Trade Management
Moving Averages
R Targets
Pivots
Avoid:
High Volume Events that occur through Intraday Levels on Larger Time Frames
Leads to Trend Continuation against the Reversal Setup
Averaging Down if Price Breaks Below Stop Loss on Volume
Sizing into a larger position once a second shakeout candle forms is acceptable, but be wary that if Price goes through the initial Stop Loss without returning to above the prior, the trend can continue against you quickly