Following a spike, price will consolidate towards the highs. These work best when visible on larger timeframes, allowing more exposure to the rest of the world. When price retreats back down (or up), the bottom of the consolidation zone acts as support (or resistance) go long (or short) at the base of the initial spike’s consolidation zone. These are best played on a 1 hour or greater timeframe, and “V” shaped charges, back into the level should be avoided. The consolidation zone is a prerequisite. Perhaps easier said,
1. Price spikes out of a consolidated range
2. Price pulls back, making a ‘flag’ pattern
3. When price revisits the bottom of the flag, its used as support
Once you start noticing them you’ll see them quite often….they’re a relatively common / repeating pattern.
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Hey Steve, just found No Brainer Trades and am really enjoying my visit. Your posts are super informative and get straight to the point, thanks, great stuff!
Its so nice method dude, great for place breakout seems work in lower timeframe too.
this is great info.
Steve, you are The MAN!
Great job, higly recommended page! I am reading Best of No Brainer Trades over and over again!
Have fun,
Simon
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Hi Steve
thanks for updating the article and the site.
If you don't mind i have a question for you, about the setup you have shared on twitter, here the charts for the readers: https://www.tradingview.com/x/cALt2zhd/
I'd like to know if even this for you is a valid spike base pattern https://www.tradingview.com/e/AiuOPDEV/ the logic behind the patter seems to my noob brain the same [the base of the flag, aka the point where the supply has exceeded demand is valid for a second attempt short to the nearest target].
Thank you for the article and for all you have shared.
Hi WO,
Right, so it's all about the leg moving lower - the spike. When price starts to consolidate / chop, that's where your reference point comes from. If you look at the examples above you'll see that all of them show signs of chop around the fade point higher up on the leg. About the recent example, I'm more than willing to admit that it's harder to spot right off the bat. I had to scale down to a smaller timeframe to see it. The reason they work is basically renewed selling pressure. New sellers stepped up to the bat at that point in the spike, and they show up again when prices get up there the second time - one way to think about.