Failed Breakdown Reclaim Trade (Order Flow + Delta)

All right, welcome everybody. Let’s take a look at my Trade of the Week, which came yesterday. As you can see, to kick off the week on Monday, price rallied really high, back up and reclaimed that 7,000 level. Overnight, structure went sideways, and then yesterday was just a one-directional downward plunge right back down. Some pretty wild price action and volatility here. So yesterday’s trade of the day  or Trade of the Week, I should say required some patience.

As price was coming down, what I really wanted to see throughout the day didn’t develop. We ripped right through most of my key levels where I was looking for this particular kind of entry down here a failed breakdown at a key level. That never materialized. It just popped all the way through and kept ripping until about the 1:00 hour, where we started to see some signs of life back to the upside, and it was the perfect time to set this thing up. So this area right here is the one I’m talking about.

As price was coming down, you can see buyers starting to step in. There wasn’t a whole lot of aggressive selling taking place from about here all the way down through the key psychological level at 6,900. You have bullish buyers sitting here slowing down the aggressive sellers, or the passive selling pressure pushing price down. Then you finally get a bit more aggressive selling on this move, breaking down a key level, and we come all the way back down here on bullish flow red bars but bullish flow. That’s delta divergence. That alerts me that something is possibly incoming pretty soon.

We come down, take out the key level, get one more final squeeze to the downside from aggressive sellers, and then the rug gets pulled. We get a nice transfer of energy, a downtrend-breaking move, a strong volume spike, and a delta shift from −1383 on that final surge down that inducement move below 6,900 back to reclaiming 6,900 and breaking the downtrend all in one move.

Price doesn’t accelerate immediately after that. It oscillates, comes back down, and retests 6,900. This is a massive candle a 24-point candle on a 5-minute chart which shows how wild the volatility was. Even in the context of a very wild day, that was huge. I allowed this to do what it was going to do. It was either going to take off without me or give a pullback, and we did get a pullback to retest 6,900.

Here was the added confirmation. If you missed the first entry and wanted to wait for a better pullback entry, right at the 6,900 retest we had more bullish buyers stepping in and bouncing price off that key level again. That was my trigger. I entered at 6,908 and was looking for price to rally back to VWAP. I ended up cutting the trade about 10 minutes before the market closed, around that area. It was about a 26-point move to the upside pretty good movement on the day.

The key takeaways were patience and letting the setup develop, waiting until nearly 2:00 before pulling the trigger. I assessed all the levels on the way down, and the key factor was the breakdown of a key level followed by a true failed breakdown. You had price and delta out of alignment, one final surge of aggressive sellers breaking a psychological level, and then a fast reclaim that broke structure. That was the change in control. I didn’t see that anywhere else during the day at other levels.

That’s the essence of the trade  a failed breakdown and reclaim, followed by a retest of the reclaimed level and then a strong move higher into power hour, helping form the daily lower wick where we continue to see demand on pullbacks. That was my trade. I hope it was helpful. Hey everyone, it’s Dale here.

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