CL1!
made a high but it failed to sustain at that level. Supply-demand imbalance was created and massive supply influx caused the price to fall down. That created a supply zone. Let's talk about how to trade this. - Find Demand/Supply Imbalance Zone in Higher time frame. Mark the supply zone and Set a price alert just below supply zone to know when the price comes near it.
- Once the price alert goes off, start monitoring the price on a lower time frame. Find reversal price structure in a lower time frame. For this example I am using 45 minutes as a lower time frame. Usually, Price forms HH-HL swings as it approaches supply zone and LH-LL as it approaches demand zone. Break of a structure would give a confirmation for reversal. Near the supply zone, You want to see the price to make LH and you get reversal confirmation when the price breaks below previous low. Similarly, Near the demand zone, you want to see the price make HL and you get reversal confirmation when the price breaks above previous high.
In the above example, we are looking to enter a trade in a 45 minutes time frame. Price is forming a rising wedge structure which is HH-HL swings. It has also formed a double top structure which suggests that price is unable to move higher. Then the price broke the previous low and made a LL structure. A short position could be opened on a pullback after the previous low is broken.