Strong Rejection of Higher or Lower Prices

In this article we going to learn about Strong Rejection of Higher or Lower Prices which concludes the Price Action Fundamentals.

• Strong rejection of either higher or lower price levels is a sudden price reversal.

• This pattern is made when the price goes one way aggressively and then turns quickly and with the same aggression and speed goes the other way.

• A classic example would be a type of candle called the “pin bar.” But pin bars aren’t the only visual form of strong rejection.

• A common sign for all strong rejections is an aggression and sudden reversal.

• What happens is that one side of the market (for example buyers) is aggressive and moves the price in one way.

• Then it clashes with the other side (for example strong sellers) which suddenly becomes even stronger and even more aggressive.

  • So the price turns quickly, and the stronger side takes over.

• The area where the other side took over is very significant because it marks a place where strong market participants aggressively rejected the current course of action and started a strong countermove.

  • This place is significant for us because it will most likely be defended again if the price gets near again.

• It becomes a new support/resistance zone. (Which will learn later in this volume.)

Below is a chart where will see rejection of higher price marked in second image

In above image rejection of higher prices is marked and in below image will see rejection of lower price marked in last image.

• As you can see, there doesn’t need to be a pin bar for us to spot aggressive rejection.

• The only rule is that there needs to be a sudden reversal.

• Candle patterns don’t concern us. The reason for that is that they are different on different timeframes.

• A strong rejection should be visible on more time-frames, not just one.

• Remember, we are analyzing the price “flow and aggression” not candle patterns.

• It takes some time to be able to spot and recognize strong rejections and tell them from rejections that are not so significant.

• But with practice and some time you will be able to do this, and

  • with a look on chart, be able read whole sentences instead of only separate letters.

• Remember, places where prices suddenly turned and changed direction are very significant.

  • We should always watch out for them in our price action analysis.