YM 5min Challenge
Past challenge from 2026-03-27. See the correct answer and explanation below.
SCENARIO
Dow (YM) is at 39,800. It has been in a tight range of 39,750-39,850 all morning. Price just tested the bottom of the range at 39,750 for the fourth time. Each test shows progressively smaller bounces (100, 75, 50, now 30 points). Sellers are getting more aggressive. Volume on the sells is increasing while bounce volume is decreasing.
Market Context
Two major Dow components (banking stocks) reported earnings misses before the open. The broader market (S&P, Nasdaq) is down 0.5%. Dow has been the relative weakling all day.
Key Levels
Progressively smaller bounces with increasing selling volume is a classic "descending floor" pattern that precedes a breakdown. Each test of 39,750 weakens the support level. The bearish fundamentals (earnings misses in key components, relative weakness vs peers) add conviction. Enter short with a sell stop at 39,745 (just below the range low) with a stop at 39,810 (above the last weak bounce high) targeting 39,650. R:R is approximately 1:1.5.
Prop Firm Implications
Range breakdown trades with a clear stop above the range are ideal for TopStep. The defined risk protects the trailing drawdown.