The article assumes you have read the "Pro Bundle >> Bundle Overview" guide.
In this article, you will learn how to perform technical analysis and trade a bullish chart.
Cheat Sheet To Analyze A Chart
Is the price trading in low risk or high risk trading zone? (check low risk zone indicator)
Is the chart trending? (check trading Line)
Does it have strong momentum? (check pink line)
Is there an opportunity to trade divergence? (check pink and yellow line)
If you missed the correct entry for the current trend then what is the next best entry? (bullish pullback, bullish divergence)
We will cover all above points and discuss how pro bundle can help in analyzing charts.
Lets analyze $AAPL chart (refer diagram-10). At a high level this chart is showing a bearish trend on the left side which slowly transitions into a bullish trend. We are going to focus on various factors: change in trend, new trend, momentum, support and resistance, etc.
I will analyze this chart from left to right (quoting the months printed at bottom of the chart).
May-2022
Yellow candle represents a short divergent signal in a high risk trading zone.
Glancing at the candles before the yellow candle tells us price is trying to break higher in a bearish trend (indicated by bright red trading line).
Lower chart indicates pink line is in the lower half section (indicates bearish trend) and yellow has formed a perfect divergence by closing above 20 mark. As soon as the yellow line closes below 20 mark, yellow candle is displayed as a short signal. Hence this setup is called bearish divergence setup.
Red candles start appearing after the yellow candle. Price is below the trading line. Weakness arrows depict downside momentum and keep pushing price to lower lows. Bearish trend is confirmed once the trading line turns into bright red color.
Bearish trend will continue as long as below conditions are true.
Pink line stays below or close to 20 mark.
Color of the trading line remains bright red.
Low risk bearish zone indicator displays the background on the main chart as light red.
As soon as trading line confirms end of bearish trend (bright red changes to light green) the pink line closes above 20 mark and the red background on the main chart disappears indicating the beginning of a high risk trading zone. As a result of these changes, price starts moving above the trading line.
Jun-2022
Price is moving above the trading line and prints a cyan candle which represents a weak bullish divergent trade in a high risk trading zone. You can trade weak divergence setups as day trades with target level set to the next resistance level of the bands.
Squeeze has started to appear while trading line is colored as light red indicating a bearish setup. Low risk bearish trading zone has started as indicated by light red background on the main chart.
Yellow candle is displayed which indicates a short divergence signal in a high risk trading zone. Looking at the lower charts, pink line is around the middle section and yellow has crossed the 80 mark. This represents a weak bearish divergence. This is soon followed by a weakness arrow which indicates strong momentum to the downside.
Is this a good bearish setup that can be shorted? Yes for below listed reasons
Yellow candle represents a bearish divergence (weak). This means price may go lower.
Squeeze represents extreme volatile conditions and price can go in either direction.
Low risk bearish zone is active. This indicated price may go lower.
Weakness arrow represents strong bearish momentum. This means price will go lower.
Combining all of the above reasons, this setup has a good probability that price will make lower lows.
Squeeze breakout occurs and price moves lower crossing the support lines indicated by outer bands from May-2022. Trading line confirms bearish trend. Yellow line shows another weak bearish divergence signal.
Trading line has confirmed end of bearish trend and price moves above it. Low risk bearish trading zone has ended.
July-2022
Price has moved above the trading line which is considered bullish. Squeeze has started. Trading line is showing a bullish trend (not confirmed). At the end of the squeeze, trading line confirms a bullish trend. Pink line is moving higher towards the 80 mark (considered bullish).
Price is trading in the upper band. Strength arrows are starting to appear.
First green candle appears on the chart. Green candle represents a low risk bullish divergence signal. In the lower charts, you will notice pink line is approaching 80 mark and the yellow line is around the 50 mark and trying to close higher. This is considered weak bullish divergence.
Low risk bullish trading zone begins. Pink line has closed above 80 mark. Strength arrows are appearing which indicate strong upside momentum. Price is showing bullish pullbacks. You can correlate each bullish pullback on this chart to the bullish divergence in the lower charts.
What are bullish pullbacks?
When charts are trending, price tends to pullback towards support levels. These are often considered good entry points as the trend is expected to continue.
Can you spot a strong bullish pullback?
Sometimes it is not easy to determine the exact support level where the price will bounce. At a high level, you can always make a calculated guess. Our indicators will clearly display the support level for every candle (outer band lines, inner band lines, trading line).
There is an easy way to spot a strong bullish pullback.
In the lower chart, look at the yellow line and check when it crosses the 20 mark. Once it tries closing above the 20 mark, it forms a strong bullish pullback pattern (refer diagram-11 highlighted green candle in white background).
Aug-2022
Trend is bullish. Price is trading in a low risk bullish zone. Pink line is above 80 mark. Price is making higher highs. You can track the yellow line and find multiple bullish divergence opportunities that can be easily traded.
