Instrument : DAX CFD (M5 chart)
Date : 30.07.2021 10h30 (UTC+2)
Today I will explain a beautiful sellers trap from the DAX indice that I used to make my day in less than 30 minutes.
I’m saying beautiful because we have several confirmations that are almost perfects.
After the london open, starting from 9h25, I was short because the volatility was increasing (see the VIX) and the first buyers reaction was violently rejected. But I had a (longer term) long idea in mind because the overnight trend induced some sellers.
1. The M5 chart
A few minutes later, when I saw an “horizontal support broken becoming resistance” trap, I took my profit on shorts and started to look for a long entry. I monitored the 100 ticks chart to get a more precise entry (remember I scalp quick moves in and out).
2. The 100 ticks chart
I drew the same sellers trap rectangle than the above M5 one. Here we can see better that there is something wrong after the london open selling activity:
As you can see, the price created an obvious resistance area for sellers to enter short positions, but it didn’t even provide a decent down move.
Why would the price come back to an obvious resistance several times with no decent down move continuation? Because it’s trapping sellers.
The overnight sellers obvious down trend was the first sign that the price could come back to the high of the day (see the article about liquidity), but this support/resistance trap was a nice confirmation, especially when the trapping zone is perfect like this.