Spring and Upthrust Trading Strategy

Spring and Upthrust Trading Strategy

In this article, I am going to discuss one volume trading strategy that is spring and upthrust trading strategy. Please read our previous article Finding Entry Opportunity using Volume Spread Analysis for better understanding of this article. As part of this article, I am going to discuss the following pointers in detail.

1.What is spring
2.Logic behind spring
3.Some element for determining spring
           Spring and trend
           Spring and volume
           Spring and follow-through
5.When should avoid trading spring
6.My trading setup using spring

Spring (opposite upthrust(UT))
  • Price dips below support and rallies to close on or near its high and back above support, so there should be a clear minor or major support zone
  • Failure to follow-through after breaking below support or recent swing low
  • All bullish pin bar is not spring but all spring is a bullish pin bar

Spring and upthrust Trading Strategy

Spring Trading Strategy Upthrust Trading Strategy What is spring

Logic behind spring Some element for determining spring

Logic

A spring is an example of a “bear trap”. WHY? Because price drop below support appears to signal resumption of the downtrend. But In reality, the drop marks the end of the downtrend, thus “trapping” the late sellers, or bears.

The strength of the sellers can be judged by the depth of the price drive to new lows below the support and the relative level of volume on that penetration.

A spring involves the penetration of a well-defined support level on low or moderate volume .think if a stock going to break the support, it must break with high volume .the spring action shows that the stock trying to break down and failed. It is an important sign of strength

Spring and Trend
During an uptrend
Pullback
  1. They will work best in trending conditions. During an uptrend when bullish signal appears, we go long.
  2. A retracement to a prior resistance now- support area is a typically excellent trade
  3. Fibonacci retracement level also worked well

Spring and Trend

During an uptrend

During a downtrend

During a downtrend when spring signal appears then we need a retest of that spring before we can go long.

Condition

  • Be sure that prior trends are over
  • Background:The background is extremely important. You should see strength in the background with stopping volume or a selling climax or end of falling market
  • Then appearing spring and Spring is Tested

During a downtrend Spring and trend

Spring and volume

Spring and Volume
Low volume spring

Volume should be lower than the original anchor(where support first occurred ) candle at support, when price retrace first time to support the candle should have low volume than the anchor candle

The shallow price penetration and low volume indicate sellers are exhausted. springs should be bought immediately.

Spring and Volume

High volume spring

High volume indicates demand coming in, as we trade with the trend , springs should be bought immediately.

If we want to trade for trend reversal. High volume indicates presence of sellers more likely to test immediately or after some rally.

In order to justify buying on the test of the spring, two criteria must be met.

  1. First of all, the volume on the test must be lower than on the spring itself. If it is not, nothing is proven and no buying should be done.
  2. Secondly, the price should hold at a higher level on the test than on the spring, It is especially positive if the price supports at or above the support level on the test.

If these two criteria are met, the stock can be bought on the test of the spring. Immediately after the test, the stock should begin a rally.

High volume spring

Spring and Follow-through

WHAT PRICE ACTION SHOULD HAPPEN AFTER SPRING

If a spring fails to rally away from the SUPPORT and price hangs near the Spring low, then Something is likely wrong

Spring and Follow-through

WHEN SHOULD AVOID TRADING SPRING
Context or background move
Supply dominated

In a Downtrend where supply is dominated. the swing down to Spring has supply(price decreasing and volume increasing) compare to demand swing, the odds of success are low

Momentum should be loss when approaching support and the spring indicate strength this is good context. If momentum increases when approaching support and the next is a spring ,the context is not showing strength and the spring should be see in suspect

WHEN SHOULD AVOID TRADING SPRING My trading setup using spring

Last demand swing

Shortening of thrust. Thrust Refers to the distance between the current swing high to a previous swing high (in an uptrend) or swings low (in a downtrend). Increased thrust is a sign of potential trend strength. Shortening of Thrust is a sign of potential trend weakness.

If last swing high is characterized by diminishing demand(price increasing and volume decreasing ) odds for success are lower

Last demand swing

Spring and upthrust Trading Strategy

My SPRING SETUP(opposite for upthrust)

Trend continuous setup

ELEMENT REQUIRED
  • SPRING
  • WELL DEIFINED SUPPORT
  • VWAP
Support
  • Last swing low or resistance turned into support
  • Fibonacci retracement level (50-61.8%)
Time frame:
  • 5 minutes
Applicable
  • Both stock and index
Context or background
  • Market in a defined uptrend
  • Cleared support level
  • Low volume when approaching support level
Set up condition
  • Price retrace towards support on low volume
  • Spring at confluence of support plus vwap (strong signal) or spring at support
Entry
  • Buy above the spring
  • Or Test of spring
Stop loss
  • Below the spring
Target
  • Next resistance
  • Or any bearish reversal price action

My trading setup using spring Spring Trading Strategy Upthrust Trading Strategy

Here, in this article, I try to explain Spring and upthrust Trading Strategy. I hope you enjoy this article. Please join my Telegram Channel to learn more and clear your doubts. https://t.me/tradingwithsmartmoney. Any doubt or question please ask happy to help you.

6 thoughts on “Spring and Upthrust Trading Strategy”

  1. Sir hats off to your work.please give some set of rules which trader should follow before taking a trade.because execution is very important thing in tradaing so please provide us some tips on rules.
    Thankyou

  2. Hi,

    Usually you say resistance and support is a zone and not a single price level. In all of your above charts you have drawn them as levels. So what is the criteria to draw such lines and not consider then as zones. Because only then we can identify spring and uprhrust and not confuse them as only pinbars ( you did mention all springs are pin bars but all pin bars are not springs )

    Regards
    Sona

  3. Can we use this for both intraday and for swing trading .?
    Also I think we can add one more check to make it a high probability trade, when the same stock makes and upthrust or buying climax and there is a failed test followed later, high volume testing , so this provides an additional confirmation when the price makes a selling climax with spring , shows sign of strength to go bullish ….kindly confirm

    1. Yes I am discussed trend continous setup .trend reversal set up is good for swing trading. Intraday trading is about trend trading .go with momentum. Will discuss more about swing trading

  4. Sir ji can we use intraday and for swing trading
    and pls add more intrday example trade with marking in uptrend and downtrend
    and sir ji we also check volume ?

Leave a Reply

Your email address will not be published. Required fields are marked *