How to Develop a Short Trade using Top-Down Analysis

2020年11月23日Good morning traders!

Today we want to show you a practical case of how to apply multiple timeframes for the complete development of a trade. In this case it is BMY stock, and it is a trade that we ourselves will take if what we are expecting happens.

🔸What can we find in this chart?

- First, what we can see is that in the 4H timeframe, the price has been moving in a range of 15-20% since May.

- A few days ago, the price faced the resistance zone that is around $64-66. We consider it a resistance zone since every time the price reaches that level, it encounters a strong supply, which generates its subsequent downward movement.

- Based on this, we decided that once a clear rejection was given, we would look for an opportunity to take a short trade.

🔸Descending to the 15Min chart, we see that after the rejection in the Resistance zone, the price generates a breakout of the Ascending Trendline.



- Added to this behavior, the Support zone is penetrated strongly to the downside, and then the price consolidates forming a corrective structure in a pullback to the Resistance zone (previous support).

- This is our opportunity to look for a short trade.

- The corrective structure offers us a correct and safe R/R ratio.

- The point where we will look for the entry of the trade will be in the breakout of the local low, with a stop loss behind the structure and the resistance zone.

- And finally, the maximum target of the movement is the uptrend line.