The Range. Too low? Too high?

Defining how high or how low a specific asset is and what we can and cannot do when one of
these imbalances have gained control.

Questions

Definition of the range

How low is too low, and how high is too high?

What is an imbalance in control?

What should I do if the price is too high or too low in the range?

Definition of the range

You know how to draw imbalances and trendlines and also how to define a trend. But
there is more to it than just locating the imbalances and assessing the trend of a certain
timeframe. We must put all of that information into context. It might be that we are
trying to buy new demand levels on a smaller timeframe with a bigger timeframe supply
level in control and a downtrend. That's why we need to learn about location and
context, more specifically about the "altitude" in the supply and demand range. That's
what this lesson is all about.

Quote
The supply and demand range is the percentage used to define how expensive or cheap
any given asset is.
How is the range calculated?

Each timeframe has its own range, no matter how big or small the timeframe is. Each
timeframe range must be calculated and respected. We must use two opposing
imbalances, one above the current price (supply) and another below the current price
(demand) in the same timeframe to have a range. A single imbalance cannot tell us how
far or how close the underlying price is from another imbalance, making it impossible to
establish a range or percentage.

In all-time highs and all-time lows scenarios, we will not be able to calculate the range
because there is no opposing imbalance to do the math. We will only know when price
is too low or too high, but not both at the same time.

Let's take a look at Cisco #CSCO American stock. Try to read my mind. What am I going
to tell you?

• Monthly in a downtrend, price is within monthly supply #1.

• Longs? No way! It's not possible to go long. As of the 18th June 2020, #CSCO has
been reacting to that imbalance. It dropped almost $5 since it reached it, nearly
10%.
• What do you think happened to the retail traders that purchased shares of the
stock at $48? Exactly, they lost! Why? You should know the answer if you have
been paying attention to the range lesson.
How low is too low, and how high is too high?

As a rule of thumb, we will use 20% and 80% to determine that the underlying asset is
too high or too low in the range to trade against it.

Quote
When an imbalance on timeframe X has gained control, trading at timeframes smaller than X will
not be allowed. For instance, if weekly supply is in control, no longs will be allowed on
timeframes smaller than the weekly.

Let’s use the previous example to determine how high or how low it would be. The next
chart shows the following calculations.

• 7.5 points were the distance between opposing imbalances proximal lines. This
means the price has 7.5 points to reach the proximal line of these imbalances.
• We will use this figure to calculate the altitude based on the default of 20%.
• These are the figures we have, 113.50 as the top of the range and 106 as the
bottom of the range.
• How much is 20% based on 7.5 points? 20% of 7.5 points is exactly 1.5 points.
• Let’s subtract 1.5 from both weekly proximal lines. We end up with 112 for the
top of the range and 107.5 for the bottom of the range.
What is an imbalance in control?

As explained in the range concept, once the underlying price is very close, or within an
imbalance, it's not a good idea to trade lower timeframes against it. When do we know
that we should not be trading against an imbalance? Price should be either too high or
the imbalance should be in control. What does “being in control” mean?

Quote
An imbalance in control is an imbalance that has been tested (any number of times) and
remains unbroken. It must be hit and unbroken to remain in control without an
opposing zone gaining control.

Let’s review this concept using BlackRock Inc #BLK monthly chart. See the chart below.

• There was a monthly supply level created at [1], which was responsible for
eliminating the monthly demand at [2] that broke the all-time high after creating
a very strong impulse that consolidated away with a few bullish ERC candles.
• Once price reaches the supply [1] proximal line at [A], we consider the imbalance
to be in control. As long as the imbalance remains in control, unbroken and an
opposing zone does not gain control, then we will say that supply [1] is in control.
What should I do if the price is too high or too low in the range?

If the price is too low in the range, stop selling into it using lower timeframes. If the price is too
high in the range, stop buying into it using lower timeframes. Pretty simple! If you break this
simple rule, you will see your live account diminish very rapidly.

For instance, NetFlix #NFLX fresh weekly supply has gained control. No more buying at
timeframes lower than the weekly. No trading on daily, H4, and smaller timeframes.

There are many different scenarios where the range will tell you what to do or what not to do.
You could be one of those aggressive traders that trade into bigger timeframe ranges in control
using smaller timeframes.

Make sure to have the highest odds possible in your trades. Trading against bigger timeframe
ranges is not one of such scenarios.

Quote
The bigger timeframe always comes first, and in the long run, the bigger timeframe will win
most of the time.

An image is worth a thousand words. We will use Altria Group #MO monthly range.

• Monthly demand level in control at #1, monthly uptrend.

• At #2 price is just too low in the monthly range to go short, the bias would be to go long
at nested levels of demand on W and D1 timeframes like #4.
• We need a bigger timeframe supply in control like W SZ at #3.
• We can look for nested D1 demand levels at the new W DZ to go long.