The Swingarm delineates three bullish zones and three bearish zones, offering traders an additional perspective for interpreting the price action of a specific financial instrument, whether it’s a stock, index, forex pair, or cryptocurrency. The further the price delves into the Swingarm zones, the more substantial the counteractive energy it may encounter.
When the price reaches an extreme within a Swingarm zone, it typically reacts and either reverses or rises, depending on whether the zones are bearish or bullish. This study simplifies the identification of key points of interest where significant buyers or sellers might be present.
The importance of a zone escalates with the timeframe. While this appears straightforward, it can become more intricate when multiple timeframes are taken into account. Swingarms operate in pairs and should be examined collectively to better grasp the potential energy to transition from one zone to another. There are both internal and external Swingarms. Swingarms that lie beyond the range of price action are external, while those within the two preceding price ranges are internal Swingarms.
If a price movement originates from an extreme external zone, there is the potential energy for the price to rebound to its next counterpart. For instance, a movement beginning in the ES 500 Futures’ extreme bullish zone on the two-month Swingarm on October 13th, 2022, would have its next major potential resistance in the weekly sell zones above, which over time could possibly break as the price strives to reach the monthly resistance zones further up. It’s crucial to always consider the energy source to better understand which Swingarms can break over time.