Below we have a fifteen minute chart of the ‘market’ as viewed through the NASDAQ 100 HOLDR (QQQQ). The issue on this particular morning was that we were in a sideways sloppy market, and we had fallen from the prior day’s high (red dotted line) to a ‘support’ area. Could this bounce have been played as a VCM buy set up (VBS) off of a support area? If so, how would you enter due to the wide red bar at the low?

Our first task is to decide if this is a playable support area. Since we are not in an uptrend, this support must be major support to be used with a VBS. Normally we want to see ‘two’ prior support area, here we have only one (1). However, there is an exception. We can use the prior pivot low, at ‘1’, if it produced a ‘significant rally’. Here, the rally from ‘1’ went all the way to the red dotted line, and traded above two prior pivot highs. So we can use the support area as major support.

The next issue is whether we even want to play this. Look how it set up with that bearish wide range bar (-WRB) into the support area. To enter over that high would leave a very wide stop, and we are not even sure the support will hold. Here is where we will zoom down a time frame, to get ‘confirmation’. Enter the two minute chart.

Notice the yellow star is the same moment in time on both charts. While the 15 minute chart leaves us with a wide stop and unsure of the bottom, look what happens on the two minute chart. The low at ‘1’, rallies up to ‘3’. On this two minute chart, that actually ends the two minute downtrend by trading above the pivot at ‘2’. This helps add to the chance that ‘1’ is the low. We then have a pullback to the red dotted line, which is the minor support from the high at ‘2’, and a two minute VBS. By using this as our entry, we have a tight stop, and the confirmation of knowing that the two minute downtrend has ended, and as the buy set up we enter goes to a new high, we actually enter a two minute uptrend.

Bottom line, we take the strategy form the larger time frame, then in some cases we can get confirmation and a better entry from the smaller time frame.