Day Trading & Forex Forum

VSATrader

Volume and price analysis for Friday 2nd November 07
By Sebastian Manby

A; prices decline, but with a narrow spread indicated that a rally is probable, in this case the non- farm payrolls, looking into the background
you can see a low after the first yellow arrow on the chart.
B; I wonder how many stops were triggered on this bar, a few thousand I would imagine, that is the purpose of the news, a wide range up bar close off the
high with the next bar down, weakness is looming. Markets do not like excessive high volume on up bars as this shows distribution, which the public cannot see as they
cannot read volume and ultimately professional activity.
Point C is potential strength, countermanded by D.
D; Classic ' No Demand/Upthrust' confirming weakness, if the market was strong, why has the closing price closed on the open? supply must be greater than demand, hence 'No demand'
E; Prices are marked down to this point as the big operators are not supporting the market as they have shorted and are waiting to cover at lower prices, this happens at this point E and the following
bar otherwise the close would be at/near the low of the bar, not way above the low.
F; The bar with the yellow arrow indicates that there is little sellers at this level as the volume is low, the big money were active on the previous 2 bars, and so we see a bottom reversal and a sign of strength
G; A previous sign of strength is now followed by a weak bar, this one is an upthrust where the close is very close to the open, the big money are not interested in higher prices at the moment.
H; Another upthrust with a different slant, related to G but a different formation, but the same result of lower prices.
I; This bar appears 3 time in the next few bars and really should be a down bar where the close is very close to the open, so you would deduce that the buyers and sellers are evenly matched, and a possible reversal
could be soon, no a bar that I would trade on for a signal.
J; As prices rally up the volume increases and the close of the bar pulls back from the high on the close, this is a sign that the
market may not have much further to go and supply is starting to swamp demand.
K; Another upthrust, market is now weak as started at point J and you should be ready to short on this bar, it is a very big clue, next bar is an up bar
on low volume confirming weakness.
L; Down she go's, a wide spread to lock you in if you are long and put you under pressure, and also to lock you out if you are waiting to short or close out your longs.
M; Up bar on low volume is 'No Demand' and is a second opportunity to short(if you can see it).
N; An up bar on increasing volume is bullish, and I would expect the market to open higher Monday, I do not read further than the open of the following day. When the small lot traders(public) are out of the market or short, the market will rally.

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Gordon G.

Dear Sebastian,

many thanks for your interesting analysis.

I rapidly went through the Daily Trading Activity file you posted and do not understand a thing.

From what I can see, you went short ES 4 lots at 1506.75 at 2:40:54 PM (during the bar following the F bar, I suppose) and covered at 1505.75 at 2:42:10 PM (during the same bar).

Apparently, please correct me if I'm wrong, you looked at a smaller time frame chart to take and manage your position, as at the time there weren't signs of weakness on the 10' chart.

Thanks for your kind attention.

Best regards.

VSATrader

Hi Gordon;

I traded 4 contracts after the close of bar G on the 10 minute chart. I should have stayed in, but not a bad return for 2.5 minutes work. I was late in getting the Emini's enabled on my account, so it was a rush trade.

Regards Sebastian

Gordon G.

Yes, not bad at all !

Cheers

VSATrader

Hi Gordon;

Here is another trade for you, and I decided that I would get Reuters as they give the best data you can get.

Regards Sebastian

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VSATrader

Volume and price analysis for Monday 5th November 07
By Sebastian Manby

A; This bar has high volume on an up bar, showing supply is present and not a good sign for higher prices.
B; Supply is swamping demand, if the close falls back to the middle or open then there is too much supply around and prices will struggle to rally. You should be looking for ' No demand' bar to short.
C; Now we have a test, a down bar on a narrow spread closing near the open, this bar has changed the situation, because prices have been quoted down and the selling is not as acute as the previous 2 bars, if you get weakness and suddenly you get a Test, you must assume that the market is still strong to a degree else the next bar would be down.
D; wide spread up closing off the high on high volume with the next bar down is weakness, the big money is selling to the small lot traders on the way up, this is how a large trader can distribute to the herd as they cannot distribute on the way down, they have to make prices rise to attract buyers.
E; The selling has decreased here possibly because the distribution has not been completed, and the volume is still quite high, now if you look at the following bar, this bar is up on very low volume, this tells us that the market is weak and cannot sustain a rally.
F; A down bar close off the lows will show that prices are supported here and the next bar is up on an increase in volume. If you notice that the volume is lower than at point D, this will tell you that there is no interest in pushing prices above point D, and this is bearish.
G; An Upthrust telling us that supply is present, the close is off the high on an increase in volume, and this tells us that supply has swamped demand(Bearish) with the next bar down to confirm.
H; Another ' No Demand' this absolutely confirms weakness and an excellent bar to short the market, and if you were fooled be the previous rally, you can make up your losses here.
I; Buyers and sellers are equally matched on this bar and that is why the open and the close are the same, the selling has been reduced and the bulls are trying to take control, you should be careful of this bar.
J; No Supply on this bar, which allows prices to be marked up for further distribution, why is this so, because if the market was truly bullish, you would have a shakeout in the background.
K; Another Upthrust, into point G shows that there is no effort by the smart money to push prices through point G, and supply knocks prices back down. The next bar is 'No demand', what else do you want?
L; There is some closing out shorts and stops caught, but the market is so weak, that the best they can do is allow prices to drift sideways.
M; Some support, but no enough to rally far.
N; Prices have drifted up, but there is no support from the traders that count and again we have 'No Demand' and the next bar is down.
O; Another ' No Demand ' from the traders that matter, the market is still weak and you can expect lower prices.
P; Again another'No Demand' and this market has no energy to rally, and as you can see the market just falls away.
Q; At this point the losses to the herd must be mounting and they are stopping out their positions giving the smart money the opportunity to cover, that is why the smart money buy on down bars and sell on up bars, to fool everyone else, and also, so that they do not mark prices against their objective.
R; More' No demand' prices cannot rally as there is no support from the smart money, they know that if their buying bull up prices, they will have to carry other traders hoping to close out at break even, and that is not the way to accumulate, so they let the market fall further to shake out the herd.
S; High volume on down bars shows an effort to shake out the rest of the herd hopefully at a large loss to the herd, as prices are closing off the lows, this shows support.
T; A test, A low volume down bar showing that supply is fading and the market is now strong enough to attempt a rally, very important here as there is supply on the previous bar.
U; A wide spread up on ultra high volume but closing off the high, weakness is still around because as prices rally, it is met with high volume(supply) and the close is in the middle, weakness. The next bar shows equality and this is enough to attempt another rally.
V; Again a wide spread up on ultra high volume shows distribution from traders who got in at point S, closing off the high is a big clue.
W; Another Upthrust, and will weakness in the background, this is confirmation allows the market to be marked down.
X; Another' No demand, this shows that the market is still weak, and that the previous Upthrust was genuine.

Outlook: I expect the weakness to continue as the market was well distributed today, but there was some support on the bar after X, this could allow prices to rise in the overnight trade
and possible into tomorrows open, we shall see.

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Gordon G.

Hi Sebastian,

thanks for these nice charts.

As regards your post #5 of this thread, I see it's an 8' chart ... what I found challenging with VSA is to choose the right time frames ... sometimes the market is fast and a 3' chart is great, sometimes the 5' and the 10' are more appropriate.

I noted that the bar you entered in is in the range of a high volume bar with close in the middle 8 bars before; supply entered there.

Have a nice evening.

Michael

VSATrader

Hi Gordon;

That is the hard part, deciding which time frame suites you, I prefer a 10m chart as I find that the signals are stronger.

Regards Sebastian