Pullback opportunities can be found in easy 3 steps using the SBER SMI analysis tool for trading:
Step 1: Let’s say you missed opportunity marked 1 in the image above
Step 2: Wait for the price to fall back below the blue line of pullback range which is a combination of 3 lines – blue, black, and red together (candle must close below the blue line)
Step 3: Check recommended direction of the trade and enter once price closes above the blue line (candle must close)
Opportunity sizing:
Normally a pullback must stay above the red line. If it falls below the red line (candle closing basis) then it is expected to result in a weak opportunity once it crosses above the blue line. Some high takers prefer to take a contra trade shot when the price falls below the red line but this carries a risk higher than usual.
Reversal before closing below the black centre line is considered a good opportunity
If the reversal happens before touching the black line i.e. candle closes below the blue link and then crosses above it (candle closing basis) then it is considered a stronger opportunity.
In all case, stop losses is placed below the black or red line as per risk appetite of the trader or investor.
Finding possible targets:
Pullback feature of SBER SMI as 2 additional lines beside pullback range (3 lines in the middle). These are the blue line marking high (above pullback range) and the black line below pullback range.
Usually, first target is kept at the blue line above pullback range
To know subsequent targets, it is recommended to plot Fibonacci immediately on opportunity build up. Subsequent targets are 1.618, 2.618, and so on levels.
Please note that the pullback feature will change the range and highs by the time price reaches the target of the previous opportunity. This is required so as to know the latest pullback range.
For short side trades, the same strategy is used as mentioned below except that the directions will change to the downside in this case.