DON'T fade a Daily Shooting Star on a resistance level

Hi Traders,

STATEMENT
The aim of this post is to provide you a detailed explanation on how to use the daily time frame to create an explicit expectation of direction in the market you might be trading. Directional bias can give you a huge hint on how to trade on lower time frames (e.g., hourly time frame).

RATIONALE
What is the value of determining a directional bias before thinking on taking a trade on a lower time frame?

• Proper identification of possible areas of support and resistance.
  
• To avoid fading high probabilities daily candles we wouldn't be aware of their existence if we would only stick to lower time frames.
  
• To facilitate the TP placement.
  

Doest it mean that I cannot fade a Daily bias?

• It will entirely depend on the date that you should gather before even thinking of trading a pair.
  
• Every traders should collect data over the past 3 years (at least) for each market he/she is trading, that provide a feedback about "How many times a D1 Candle is confirmed or faded (%)"; How long does it take for the trend to confirm/fade a D1 bias (number of days)."
  
  THE PLAY
  With that in mind, let's have a look at the EURUSD chart on the Daiy time frame and lets focus on what happened at the end of February 2021.
  
• First of all, we identify daily levels of support and resistance (1) and (2). We have identified those 2 as they clearly were rejected several times since August 2020.
  
  • Still on the Daily time frame we can also identified a inverted head and shoulder pattern. This one in particular is very obvious to identify, meaning that a considerable amount of retail traders are most likely going to play it long whether on a breakout or on a break and retest around the marked price in below screenshot.
  
  • If we move forward one day, the 25th of February 2021, a Daily Shooting Star is printed showing that buyers lost control by the close of the day, and the sellers may be taking over. At that moment it's highly probable that a big amount of retail traders are trapped as they went long after identified an inverted H&S pattern. But for us, it means that we've just established a bearish bias and will seek an entry on a lower time frame.
  
  • On the H1 time frame I will look for an entry below the D1 area I marked as support/resistance level. Additionaly I'm also drawing H1 levels that I consider as potential trouble areas where the price could react significantly.
  
  • We have now identified our entry point.
  
  • THE RESULT Price hit our TP on 5th of March 2021, generating a ROI of 4.14%.
  
  
  Feel free to like, share and to leave a comment and ask any question you would have regarding this play :)