A trader shows how to spot reversal setups after sharp 100-150 point selloffs. He enters slightly above the capitulation candle's low, stops just below it, and rides the bounce as shorts cover. The setup uses a fork pattern to identify exact entry and stop levels.
You have a strong move down, putting 100, 150 points down. And now you have that capitulatory move. And then you have something like this where you have long wick, short body. So this is where the fork comes in. So you have that strong candle. So your entry would be, you're looking for this candle to test this low, but not break it and then end up looking something like this. This is where you would take an entry. Let's say this level is 23. Your entry would be 27. Your stop is at 17, just slightly lower. And then you start making that reversion high, start cleaning up all of these late shorts.
