A trader explains how to profit from a pattern where assets gap up sharply after consolidation, trapping buyers at lower prices. When they panic-sell at the open, the price crashes. The setup requires spotting a high-volume candle that creates resistance, followed by a two-month flat period and a 100% gap up.
So for all the new traders out there, to be able to trade bounce short, we typically have to look at the long-term chart. The chart ideally that we want to see is individual candles that creates massive amount of resistance, ideally something like that. Then we had one spike on the volume bar, probably trades, let's say, 30 million. After the big spike into 5 from maybe $1, it drops all the way down and stay flat for 2 months. Then all of a sudden we see a gap up short, gapped over 100%, 2 to 4.5. When we run into this type of situation, is first of all, we know that we traded 30 million volume on this one candle and we dumped the day after, majority of the volume are stuck around $5. And it's been 2 months, everybody's stuck, they want to get out. As soon as they see a gap up short, they want to exit as soon as the market open. So it will create that massive selling pressure just based on human psychology because they want to break it even.
