Exhaustion
Today, we will break down candle exhaustion and how to use it for high-probability trade entries. We will analyze a bearish engulfing pattern, the role of trendline breaks, and how we combined this with the ORB strategy at the US open to secure a strong entry for the 2905 target.
What is Candle Exhaustion?
Candle exhaustion occurs when price action slows down after a strong move, showing signs that buyers or sellers are losing strength. This is often seen through smaller-bodied candles, wicks rejecting key levels, or a sharp engulfing candle reversing prior movement.
Candle exhaustion smaller body's larger wicks.
A bearish engulfing candle formed, engulfing three previous candles, signaling that sellers have aggressively stepped in. This confirmed a shift in momentum, suggesting that buyers were losing control. Key Takeaway: A multi-candle engulfing increases the strength of the reversal signal. The 15-minute trendline was broken, adding further confluence for a shift in market structure
Early entry model
Price came and tapped the supply zone, rejecting and closing under trend. This was the 2nd confirmation of sells.
This 2nd engulfing was the 3rd confirmation sellers have taken control.
The US session opened at 2:30 PM, a key time for volatility.
We then applied the Opening Range Breakout (ORB) strategy to refine our 2nd entry. With price under the 50 moving average
The breakout confirmed momentum towards our 2905 target, aligning with our pre-trade
analysis.
Conclusion
By recognizing candle exhaustion, engulfing patterns, and trendline breaks, we stacked
confluences for a high-probability sell trade.
The ORB strategy allowed us to refine our 2nd execution at the perfect time.
Lesson: Trading is about patience, waiting for confirmations, and executing with confidence.
