Contents:
- 1. Comparing Our Week 3 Model vs. Actual Price Action
- 2. What We Did Well in Week 3 Scenario Modeling
- 3. Where We Can Improve Moving Forward
- 4. Key Takeaways for Future Scenario Modeling
- Conclusion: Building a More Adaptive Trading Approach
As we assess our scenario modeling performance for Week 3, it is important to evaluate how our projections aligned with actual market outcomes. By comparing our Week 3 Scenario Chart with the Week 3 Closing Chart, we can refine our predictive strategies and improve our execution in future weeks.
Week 3 Scenario Model for URC: Projected Support, Resistance, and Market Movement Analysis
URC Daily Chart at Week 3 Close: Evaluating Market Movement as of January 18, 2025
1. Comparing Our Week 3 Model vs. Actual Price Action
🔹 Expected Scenario (Week 3 Model)
- Probable Resistance: 80.70
- Probable Support: 77.07
- Target Breakout Zone: 85.00 (1/3 Zone)
- Stop-Loss Adjustment: 73.80
Key Assumptions in Our Model:
✅ We expected URC to consolidate around the 77.07 support level before attempting a move toward 80.70.
✅ We projected that, if momentum built up, a potential breakout towards 85.00 could occur.
✅ Our updated stop-loss of 73.80 was positioned to protect against downside risks while allowing price action to develop.
🔹 Actual Market Movement (Week 3 Closing Chart)
- Closing Price: 68.60
- Support Failed: Price dropped significantly below 77.07 and even the stop-loss at 73.80.
- Bearish Momentum: URC fell sharply, breaching multiple support levels with increased volume.
- Moving Averages: The 20-day MA (76.37) failed to provide support, confirming further bearish sentiment.
Key Observations from the Actual Price Action:
🔻 The expected support level at 77.07 did not hold—instead, a strong breakdown occurred.
🔻 Stop-loss positioning (73.80) was breached, confirming the importance of having a rigid risk-management system.
🔻 Bearish volume surged, indicating strong selling pressure rather than a recovery attempt.
2. What We Did Well in Week 3 Scenario Modeling
✅ Incorporated Stop-Loss Adjustments: Our dynamic stop-loss strategy at 73.80 was a good move, as it prevented excessive drawdowns.
✅ Plotted Probable Resistance & Support Correctly: While price did not respect support, the levels were based on valid historical price action.
✅ Anticipated Key Market Zones: Our 1/3, 2/3, and 3/3 breakout zones correctly outlined potential bullish scenarios, even though the market ultimately moved in the opposite direction.
3. Where We Can Improve Moving Forward
🔸 1. More Focus on Downside Scenario Modeling
🔹 Our scenario focused heavily on a potential breakout but did not fully model a downside continuation scenario in the event of a breakdown.
🔹 Moving forward, we should build alternative scenarios that consider:
- A breakdown below key support levels (like what happened this week).
- Adjusting stop-losses dynamically based on trend weakness.
- Identifying lower probability, high-impact events (like a major support breach).
🔸 2. Incorporate Stronger Volume & Trend Analysis
🔹 The Week 3 Closing Chart showed a strong increase in selling volume, signaling high conviction from sellers.
🔹 Our future models should incorporate volume analysis to confirm or invalidate price setups.
🔹 If volume is declining while price is testing support, it may be a better indicator that the level is weak, helping us adjust our trade plan.
🔸 3. Refine Tactical Entry & Exit Decisions
🔹 Given the level of volatility, we should explore smaller tactical entries first instead of assuming a full position at a key level.
🔹 Consider layering into positions based on confirmation signals (e.g., if support holds for multiple days rather than entering immediately).
🔹 Transaction costs must also be factored in when making rapid adjustments to positions. (Read More)
4. Key Takeaways for Future Scenario Modeling
✔ Develop Multiple Scenarios – Avoid focusing too much on one primary expectation. Instead, create a bullish, neutral, and bearish model to prepare for any market movement.
✔ Use Volume Confirmation – Support and resistance are only valid if volume confirms the level. Next time, check whether buying volume supports price action before committing to a trade.
✔ Improve Stop-Loss Strategy – The hard stop-loss was effective, but a more dynamic approach (like a trailing stop) may help capture upside while protecting against deeper losses.
✔ Adjust Trade Execution – Future models should factor in smaller position entries rather than assuming full exposure immediately.
Conclusion: Building a More Adaptive Trading Approach
Week 3 provided valuable lessons on scenario modeling, stop-loss placement, and volume analysis. While our upside expectations did not materialize, our risk management approach helped mitigate major losses. Moving forward, more robust alternative scenario modeling and volume-based confirmations will enhance our strategy.
🔔 Next Steps:
- Improve downside risk scenario planning for better trade execution.
- Adjust position sizing strategy to allow for tactical entries.
- Use volume confirmation as a key factor in future market projections.
By refining these elements, our Week 4 model can become even more accurate and adaptable to market conditions! 🚀
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.
Related Readings
- Micro Stock Trader Portfolio Tracker Page
