How to read price action

Price action is the record of where a market traded and where it closed. This educational framework describes common reference points; it does not forecast direction or prescribe trades.

Start with completed reference points

Prior-day high, low, and close describe the completed daily range. Prior-week high, low, and close provide the same context across a longer interval. These are shared references: a chart can show whether price traded through them, paused near them, or closed on either side. They are observations, not guarantees.

Read rejections in context

A rejection is a move through or toward an area followed by a return away from it. A wick can be one visual clue, but one bar does not establish a rule. Time of day, surrounding range, volatility, and whether later bars accept or move away from the area all matter.

The 21-period average

A 21-period moving average is the arithmetic average of the most recent 21 closes in the selected timeframe. It is a smoothing tool, not a support, resistance, or prediction engine. Note the timeframe: an hourly 21-period average represents a different window from a daily one.

Opening gaps

An opening gap exists when a session opens away from the preceding reference close. Record its direction and size, then observe whether subsequent trading overlaps the prior range. A gap can remain open or become overlapped; neither outcome is assured.

Session structure

For U.S. index futures, it can help to distinguish the overnight electronic session, the U.S. cash-equity open, the mid-session period, and the cash close. For metals and energy, scheduled data, inventory releases, and global market hours can alter participation. Structure labels time and liquidity conditions; it is not a signal.

Chart examples from recorded H1 bars

The charts below are rendered from the latest available FuturesPrep engine bars.json dataset at build time. They show completed hourly bars and a 21-period average only; no projected path, entry, or target is included.

Practical tips

• Label the timeframe before comparing a level or moving average.

• Separate a completed bar from an in-progress bar.

• Write down prior-day and prior-week references before describing a chart.

• Treat a gap, wick, or moving average as one observation among several.

• Check the event calendar and session clock before assigning a narrative to a move.

FAQ

Does a 21-period average predict the next move?

No. It summarizes prior closes in the selected timeframe and changes as new bars complete.

Is a rejection always a reversal?

No. A rejection describes observed movement away from an area. It does not determine what happens later.