An important aspect to successfully trading is identifying previous day’s levels. Being able to identify previous day’s support and resistance levels is crucial when planning your trade. These levels are primarily used to time your entries and your targets. A prime example would be $CLVS.
When coming up with a game plan for $CLVS, we took into account the previous day’s range that developed into a bull flag pattern. Knowing the range before you enter today’s is critical because when the stock opened up, you can see how the stock reacts in response to that range. Once the market opened, $CLVS soon broke the range, particularly the descending triangle wedge of the bull flag pattern.
When that range broke, but I added a couple hundred shares as the stock was breaking out of this pattern. This was our first entry of the day we didn’t want to go too crazy. As soon as the trade was entered, the stock started spiking up to $70. When it setup for a higher pattern, we took another shot then sold some into the spike and sold the rest when it broke underneath the 9 EMA.
What we saw here is not a traditional flag pattern, because you used the setup based on the previous day. Knowing your levels is one of the most important things in trading. Sometimes if we focus too much on what’s happening on the 1 minute chart or the 5 minute chart, we tend to get tunnel vision. We forget about what’s happening on the longer term picture, the daily and intermediate timeframe. The intermediate time frame can help identify patterns and levels to trade around them. If you know these levels it can give you an edge for better entry beyond the minute by minute basis.
As traders it feels like we’re playing three dimensional chess. But it’s not only about what we see behind of us, but what we see in front of us and beyond.
If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at firstname.lastname@example.org today!