Thought Process: Stock prices do not always keep falling and similarly they do not go up in a straight line. There are support and resistances, peaks and valleys, buying and selling zones — Whatever you want to call it. The point is that these are excellent price points for trade entries (with confidence). These buying and selling zones are not single price candles but a group of candles with upper and lower shadows implying selling or buying pressure.
A little visual to help you understand:
These individual price candles may not tell the whole story. It is actually the group of price candles that indicate such pressure zones. Therefore, while reading charts I would recommend look for at least three to four consecutive candles with top or bottom sticks. And if these sticks overlap each other — that is even better as that creates an even stronger pressure area.
Here is an example of how a buying pressure area can look like to play the Long side.
A. Look for bullish set up by identifying Pressure area
B. Go Long right above the bullish candle that forms after the pressure set up
C. Place a stop-loss right below the Pressure area
It is best to show with a real life example. Take a look at this $SPX Chart from today (Feb 8th, 2019). And Yes, I did trade that with Call options and Tweeted about it in real time. Click here to see the Tweet.
Look for an opposite set up to identify and trade on the Short side (Selling Pressure Area). If such set ups are combined with Support and Resistance levels, they provide high confidence trades and greatly improve your Trading wins.
Remember — Patience & Process !!
All the best…