Liquidity I - More in-depth Rollover
That previous example was easier to understand, it’s one of the more frequent models to trade in the markets. But what does it mean when price will break structure and then pullback?
Theory
Let’s see.
It’s all in the rollover. Do you see in this case how the low we have created after the impulsive move down has taken out previous sell side liquidity that formed?
Exactly, this implies that there has been some sort of injection/distribution of price after taking out the liquidity.
This then breaks previous structure, labeled as —x—, where price took out previous highs which caused the breach of liquidity. This in turn means that we can anticipate a deeper pullback from the liquidity void as price is building stronger structure.
This also means that the pullback will most likely be longer and deeper.
It’s all in the details of the retracement of an impulsive move... Look closely.