How I Analyze Market Structure - Breakout vs. Rejection

2023年9月25日Hello all,

First post.

I wanted to share a valuable insight I use in my trading strategy to evaluate market structure.

The only strategy I trade is 1.) a break and hold with volume above/below a key level 2.) bounce at key level 3.) reject at key level

Understanding Market Structure:

Obviously when we see higher highs accompanied by higher lows, it's a clear sign of an uptrend and vice versa.

If the price approaches a key level (in this case AMZN $132) after bouncing from a higher low, I would anticipate a break to hold that level and climb higher. However, that's not what happened here.

On the other hand, if the price approaches a key level after forming a recent lower low from the prior pivot, I like to be prepared for a potential rejection. This could indicate a shift in sentiment and see some reversal follow through.

Today's price action in AMZN is a great example of this type of PA. It can be confusing to some traders to differentiate a bounce/rejection from a breakout/breakdown after a level has seen reaction multiple times.

If you're unsure on the trend, zoom out. Even if price is trending on, say the 1H, you may see something completely different on the daily.

Hopefully this makes sense and can help at least a couple of people.