One of the neat things about reading Price Action compared with other methods of technical analysis is that you get a lot more subtle detail that you might otherwise miss.
Consider the last week or so of the S&P 500
Firstly we have a gap up with no follow through. After such a strong move the highest probability is that this is an exhaustion gap caused by idiots FOMO buying. The same idiots who hated it at the lows now love it at the highs.
Secondly we have an outside bar. From the Price Action Masterclass outside bars are the bars of confusion and uncertainty. Both longs and shorts are being faked out of their positions, replaced by weak hands.
Thirdly we have a retest of the highs.
Know this. It is NEVER safe just to short a strong bull move because “it’s gone too far and it’s overbought”.
The safety first method of shorting bull moves is to wait until you have evidence of exhaustion and then wait for a retest.
Here is the setup
The reason this is a low risk way to play it is that if the market is going to keep going up, then it probably won’t ever break the sell trigger. By waiting until the market actually starts falling before getting short you increase your odds of success a lot.
Enjoy your day