Introduction

When price sweeps both the high and the low of a daily candle, it can be quite difficult to predict where the market is likely to move next. Since both sides of the candle have been taken, many traders struggle to determine the direction price is most likely to follow.

However, there are ways to approach this situation. By understanding the mechanics of the candle that swept both sides and combining that with Internal Range Liquidity (IRL) and External Range Liquidity (ERL), we can develop a clearer idea of where price may be heading next.

In this article, we will look at two ways to analyze the daily high-low sweep and anticipate the market's next move.

1. Understand the Mechanics of the Candle

The first thing to look at when price sweeps both the high and the low of a daily candle is the candle's formation. Pay attention to the size of the wicks and where the candle closes, because this can give you an idea of which direction price may be favoring.

For example, let's say price sweeps both the high and the low of a daily candle but leaves a huge wick to the downside, creating a candle that looks like a hammer.

Despite the double sweep, this type of candle formation can still suggest bullish pressure. The long lower wick shows that price traded lower but then moved back up before the candle closed. This may indicate that buyers are gaining strength and that price could potentially move higher towards the recent high.

The same principle applies to a bearish scenario.

If price sweeps both sides of a daily candle but leaves a long wick to the upside, forming something similar to an inverted hammer, it may indicate bearish pressure. Price traded higher but was pushed back down before the candle closed.

In this situation, we may anticipate that price could continue lower and potentially take out the low of the candle.

Understanding the mechanics of the candle is important because even when both sides have been swept, the way price reacts after taking those levels can provide clues about its potential direction.

However, candle formations alone do not guarantee continuation in either direction. This is why we also need to consider the location of price and the liquidity it is likely to target.

2. Understand Where Price Is Likely to Go Next

The second way to analyze a daily high-low sweep is by looking at the surrounding Internal Range Liquidity and External Range Liquidity.

Remember, price does not move in isolation. We need to understand where price is coming from, which liquidity it has already taken, and which liquidity remains available as a potential target.

For example, let's say price sweeps both the high and the low of a daily candle, but there is an important Internal Range Liquidity above the current price.

In this situation, even though we have had a double sweep, we can still anticipate a potential move to the upside toward that Internal Range Liquidity.

Now let's look at another example.

Suppose price has already tapped into an Internal Range Liquidity and started moving to the downside. However, it has not yet completed its Internal Range Liquidity to External Range Liquidity cycle because the corresponding External Range Liquidity remains intact.

Price then forms a daily candle that sweeps both the high and the low.

In this situation, we can still maintain a bearish outlook because the original IRL → ERL cycle has not been completed. We may continue anticipating a move to the downside toward the External Range Liquidity, provided price action continues to support that expectation.

The important thing here is that we are not changing our bias simply because both sides of the daily candle have been swept. We are looking at the bigger picture and understanding that price may still have an outstanding liquidity target to reach.

Final Thoughts

When price sweeps both the high and the low of a daily candle, don't rush to assume that the market has become unpredictable.

The first thing to consider is the mechanics of the candle. Look at the wicks, the candle's close, and whether the formation suggests bullish or bearish pressure.

The second thing is to understand the overall context of the market. Identify the relevant Internal Range Liquidity, check whether its IRL → ERL cycle has been completed, and determine which Liquidity price may still be targeting.

By combining candle mechanics with your IRL → ERL analysis, you can develop a more structured view of the market, even after a daily high-low sweep.

Remember, these are ways to form a directional bias, not guarantees of what price will do next. Always look for supporting price action and manage your risk accordingly.