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A Nice Price Action Trade on a Pullback

After two solid days of nice moves to the North side, today’s action was very choppy. While seeking a trade we took everything into consideration and tried to stick to the trend like we’ve been doing all week. This trade was based on a solid move through resistance one, followed up by a nice pullback. The move prior to this action also had given the trade more confidence in our decision making.

We always try to trade what we see by using current market conditions as well as what has happened in the most recent period of time. When price pulled back to an area of support that occurred just a couple hours prior, we knew this would be a good location to take a call option. This call option found the bottom of the trend on the pullback and pushed higher and gave us a nice 13 pip winner. We opted to come into this trade after the price had made a secondary move on the pullback and created a nice one minute doji candle.

When you can take pullbacks on all trending markets it’s always nice to know you’re in the direction of the trend. In this case, by taking this pullback we knew we had a better chance of the price moving back up then going down. In the end, this trade signified how powerful pullbacks to support levels can be in certain market conditions.

The image right below shows the pullback on July 27. The price action is pretty clear. You can see that doji candle form where we entered our trade. Price moved up and only came back near our entry but never through our strike price. The 24 option trade we took ended up giving us a nice winner.

Price Action Pull Back Trade

The second image below shows a potential secondary trade which works against the trend. You can see how price has moved up significantly to resistance two area and price literally pulled back right after passing through. Any resistance or put option trade would have been a winner based on this price action. By the time price started moving back up again it wasn’t until after it dropped nearly 20 pips to the south side.

Resistance area Put Option

We had a great trading week and we hope you did as well. Keep an eye out for new trades next week and anything else that might come about.
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