What Is a Sign of Strength?
A Sign of Strength is a strong rally on widening spread and rising volume that pushes price toward or through the top of the range. It shows that buyers are now willing to pay higher prices and that supply is thin.
Quality Checks
A rally without these features may be just another swing in Phase B.
- Wide bars closing near their highs.
- Volume higher than recent rallies.
- Price rises above prior swing highs within the range.
- The next pullback is shallow and on lower volume.
Trading the SOS
A common approach is to wait for the pullback after the SOS (the Last Point of Support) rather than chasing the bar. The stop can sit below the pullback low, with a first target at the range high and a second target using the range width.