How to identify whether we are in Bearish Trend Consolidation?
In previous 3 lessons we have seen 3 different types of trends (i.e) “How to identify whether we are in an uptrend or downtrend or bullish consolidation”. Now we are moving to next type of trend, which is bearish consolidation.
In this video, we are going to see the rules to define and identify a bearish consolidation.
Bearish Consolidation
A bearish consolidation happens when price was in an downtrend and after that, either
· An descending downtrend line is broken by one full candle (the open/high/low/close) and it is fully above the trend line OR
· The valid supply zone — irrespective if it was a CP or Peak — above price is broken (Even if it is just by a one tick) OR
· When both these happens
When any of these scenarios happen, you are not allowed to take any shorts (selling) in the direction of the previous downtrend, until
· Price makes a low that is lower than the previous low (price resumes downtrend) OR
· Price hits a supply zone of 1 higher time frame above it, also known as realignment
IMPORTANT: Please do not stress out over the last point yet. You will learn this in a later lesson. For now just learn and accept this rules until it becomes second nature to you. The last point is the concept of the realignment and sequence mentioned earlier.
Possibility 1
An descending downtrend line is broken by one full candle (the open/high/low/close) and it is fully above the trend line
Possibility 2
The valid supply zone — irrespective if it was a CP or Peak — above the price is broken (Even if it is just by a one tick)
So when this bearish consolidation happens, we should stop taking any trades in the direction of the prior trend and wait for the next signal to be formed.
So to summarize, we can consider that bearish consolidation has officially began, if price was in a prior downtrend and if:
· An descending downtrend line is broken by one full candle (the open/high/low/close) and it is fully above the trend line OR
· The valid supply zone — irrespective if it was a CP or Peak — above the price is broken (Even if it is just by a one tick) OR
· When both happens
Hope you are clear on “How to confirm whether we are in bearish consolidation” now.
With this we have completed all the 4 types of trends in the market. Go through all the last 4 videos together and write down the rules. This will help you to spot the current trend in the market.
For more details and examples, checkout the video: