In this post, we'll delve into the "Big Green Above Resistance" setup. This setup is characterized by a single candlestick with a relatively large green body that overcomes nearby resistance and closes near the high of the candle. The resistance could be a Horizontal, Pivot, Congestion, Gap, or a combination. This pattern indicates strong bullish momentum and the potential for further price expansion.
(Fig 1.1 - Chart example of Big Green above Resistance)
To be considered tradable within our strategy, the setup must meet specific criteria:
Setup Conditions:
Formation Timing: The setup should complete on C3 at 12 PM, C4 at 1 PM, or C5 at 2 PM. Setups forming on C2 are not eligible.
Trading Conditions:
Trades at 1 PM (Completion of C4): The setup should form at C3 or C4. If the setup forms at C3, C4 should not be an adverse red candle or a long green candle. Look for a narrow-range candle (red or green) or a small doji indicating consolidation.
Trades at 2 PM (Completion of C5): The setup should form at C5.
The setup should qualify for a trade by meeting the trade selection criteria (refer to the "Trade Selection" section for details)
Key Elements of a Big Green above Resistance Setup
Close Above Resistance:
The close should be above the real bodies of the candles offering resistance, though it's acceptable if the close is not above the upper wicks. The close should be near the high of the candle, without a long upper wick.
A close above the opening gap down, such that the gap gets closed, is a valid signal to go long as the opening gap down is considered strong resistance.
If C4 or C5 is the big green candle closing above horizontal resistance formed by prior candles on the same day (C1, C2, C3), it is an acceptable trade.
Body Length:
The body length of the big green candle should ideally be more than the average body length of nearby candles. Medium-sized candles are acceptable if the close is near the high.
Avoiding Conspicuous Breakouts:
Avoid trades if the big green candle is the first close conspicuously above multiple resistance points formed over several days or a breakout above a prominent pattern like a Reverse Head & Shoulders or a wide rectangular range. Such breakouts often retrace, trapping buyers.
It's safer to wait for a retracement to resistance and a second breakout. However, if the candle closes above resistance from the last couple of days that is not very prominent, proceed with the trade.
By 1 PM or 2 PM as the case may be, you should have decided whether to take the trade or step aside. If you’re unsure, it’s better to step aside. Avoid chasing momentum at unfavourable prices when the market becomes fast.
Chart Examples:
Carefully study the provided chart examples, paying attention to annotations that explain the price action behind the setup. Observe the results after the trade execution.
(Fig 1.2 - Chart example of Big Green above Resistance on Nifty Futures)
(Fig 1.3 - Chart example of Big Green above Resistance on Nifty Futures)
Win Ratio: The Win Ratio, a critical input for Trade Selection, is simply the number of successful trades divided by the total trades. The Win Ratio of this setup is around 85% based on backtesting past data for the last 2 years.
Please click on "Next Post" to move to the third Bullish Setup - Triple Falling Bottom at Support.
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