Short Setup Masterclass: Perfect Retest of dOpen

2 days ago

Key Observations

1.) Wave Structure & Flat Top Formation:

• The completion of a 5-wave structure aligns with Elliott Wave Theory's indication of a potential reversal or corrective phase.
  

• A flat top pattern at the 5th wave signifies a strong resistance level, which led to a structural break to the downside.
  

2.) Daily Open Retest:

• Price perfectly retested the daily open (dOpen) before rejecting it. This level now acts as a strong resistance, offering a favorable risk-to-reward (R:R) ratio for short entries.
  

• Stop-loss (SL) placement is ideal just above the daily open to minimize risk.
  

3.) Lack of Bullish Volume:

• Current ranging behavior lacks bullish volume, further supporting the bearish case for a continuation to lower levels.
  

Support Zone & Confluence Factors

The immediate target for this short trade lies at the confluence-rich support zone near $3.3184, identified by the following factors:

1.) Fibonacci Levels:

• 0.382 Fibonacci retracement aligns with this zone, confirming its significance.
  

2.) VWAP (Volume-Weighted Average Price):

• The VWAP from the swing high indicates $3.32 as a key level.
  

3.) Negative Fibonacci Extension (-0.618):

• Projecting from the recent impulse points to this area as a potential corrective target.
  

4.) December 16th High:

• This level now acts as a magnet for liquidity, increasing the likelihood of a revisit.
  

5.) Liquidity at Swing Low:

• The swing low at $3.3184 holds significant liquidity, which could be swept during a bearish
  move.
  

6.) Fibonacci Speed Fan (0.618):

• The 0.618 speed fan intersects around $3.32, adding further confluence to the zone.
  

Trading Strategy

Short Trade Setup:

• Entry: The ideal entry was at the dOpen retest. A short trade can now be initiated at the current price with a smaller position size.
  

• Stop-Loss (SL): Above the daily open to minimise risk.
  

• Take-Profit (TP): Targeting the confluence zone at $3.3184.