The second chart is the 1 minute time frame which highlights the key criteria to look for when scoping out the wide gap 3 pivot point base and break.
I developed this setup to trade wide, high volume gappers because they always seem to break long before the 5 period EMA catches up to price on the 15 minute time frame. Since proximity between price and the 5 ema is a criteria for a solid entry point on the 15 minute time frame, I was never sure of the correct timing and often let these setups pass me by. The last two charts show how far the 5 ema was lagging after the BO and just prior to the BO. In fact on this trade, price and the 5 ema never met until after the target (38% Fib. extension of the previous day low to the ORH) was achieved. A wide BO bar that closes strong helps pull the 5 ema closer to price.
The attributes I look for on the 1 minute chart are:
- 3 pivots near the OR (high/low for shorts) define the base, ideally the pivots form near a whole or half dollar level;
- price prints higher lows (lower highs for shorts) after each pivot;
- tight price/volume contraction just before the BO.
- 50 SMA breaks in close proximity to shorter MAs prior to or at BO.
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