Decoding Volume: Support/Resistance/Supply and Demand

[tech/a]

Perhaps an example of some short term resistance and Distribution.
on 9 min FTSE Chart.

 

[tech/a]

To continue from last night singular bars of high selling became an area of distribution over multiple bars.

 

[Apollo_kk]

Tech - I must say that you have raised an interesting topic here. However, I feel that we need to be clear on the concepts, their relationship and inter-relationship. Concepts, or variables, being Support/Resistance, Supply and Demand, Accumulation and Distribution and today you raised another concept in terms of exhaustion and these being in relation to the variable of volume. Furthermore, from the discussion I am unclear which is the dependent and which is the independent variable or even if it matters. Does volume depend on support/ resistance or is it the other way around? I need to do some thinking on the matter.

 

[explod]

Great thread, the basics are where it is at and it does not come better than what is being espoused here.

Newbies note well. And do not be afraid to ask questions, sometimes it is something that we all want to know.

 

[Boggo]

Tech - I must say that you have raised an interesting topic here. However, I feel that we need to be clear on the concepts, their relationship and inter-relationship. Concepts, or variables, being Support/Resistance, Supply and Demand, Accumulation and Distribution and today you raised another concept in terms of exhaustion and these being in relation to the variable of volume. Furthermore, from the discussion I am unclear which is the dependent and which is the independent variable or even if it matters. Does volume depend on support/ resistance or is it the other way around? I need to do some thinking on the matter.

Have a squizzy here Apollo...
http://www.scribd.com/doc/12681451/Basic-Trading-Guide

 

[OldFart]

If you guys are talking stocks, have you ever used L2 quotes?

You probably have, but in case someone didn't....

 

[tech/a]

Tech - I must say that you have raised an interesting topic here. However, I feel that we need to be clear on the concepts, their relationship and inter-relationship. Concepts, or variables, being Support/Resistance, Supply and Demand, Accumulation and Distribution and today you raised another concept in terms of exhaustion and these being in relation to the variable of volume. Furthermore, from the discussion I am unclear which is the dependent and which is the independent variable or even if it matters. Does volume depend on support/ resistance or is it the other way around? I need to do some thinking on the matter.

sorry O/s at the moment sadly not for a lot longer!
Anyway I dont know that there is a dependancy on all or any.
there is however a tendacy to see clear alterations in volume at points in a trades history.
lets take exhaustion of a move
Your likely to see a dramatic increase in volume and possibly range as traders unload at an old resistance level.
You may also see it in the form of increased volume on a squat (Tight range bar) generally considerable THEN followed by a definate reversal bar---this bar being the key.
IF however that bar is followed by a bar which clearly breaks resistance then it can be seen that there is continued buying and old resistnace is likely to become support.

Subtle but one of the nuences in reading volume.
Personally I believe trading volume is a case of patience.
Only taking trades which clearly correlate to a number of prior---and importantly continued --- confirmed chart analysis.
For instance going long on a bar which bounces off previous resistance (now support) and placing a stop below that new support would be a good trade in my view particularly if there was blue sky above and buying was moderate---not massive.

There are many nore and when I get back will run through charts in the EOD format (along with some others) which demonstrate the topic and variuos aspects we bring to the table.

In the meantime I have Fiji golf club t time with my name on it.
Bula!

 

[hmmm]

Hi tech/a,

I realise your charts don't display candlestick bars but do you use these high volume wide range bars as support and resistance zones? or do you look further into the price spread and pull out individual elements like close or high or low individually?

Cheers

 

[tech/a]

Ultra high volume bars are what I describe as volume support or resistance zones.
Regardless of method of charting.
Bar/Candle---
I have posted many charts on this on this thread.

 

[hmmm]

Ultra high volume bars are what I describe as volume support or resistance zones.
Regardless of method of charting.
Bar/Candle---
I have posted many charts on this on this thread.

I guess what i was asking is what else do you read from the price spread? how do you value a wide spread as opposed to a narrow spread? do these change the S/R thinking? what about the close? does this come into play at all?

cheers

 

[tech/a]

I guess what i was asking is what else do you read from the price spread? how do you value a wide spread as opposed to a narrow spread? do these change the S/R thinking? what about the close? does this come into play at all?

cheers

Its a good question and one which deserves more time for an answer than I have now. It is in fact the crux of interpretation of VSA a question I'm sure pondered upon by many/if not all who investigate VSA.

 

[hmmm]

Its a good question and one which deserves more time for an answer than I have now. It is in fact the crux of interpretation of VSA a question I'm sure pondered upon by many/if not all who investigate VSA.

Thanks hey,

i'll see what i can dredge up on the matter and maybe ask you a few questions,

Regards,

James

 

[lenny]

Could someone give me their opinion on BTA chart.

Looks to me that its in basing pattern? Is this in an accumulation phase?

Regards
Lenny

 

[tech/a]

Sadly from a VSA stand point there is distribution rather than accumulation.
This is evidenced by each very high volume bar being followed by a high volume reversal bar indicating the initial very high volume bar was in fact dominated by selling rather than buying.

There is nothing in this chart at this point which indicates accumulation---in my view.
14 to 19 sept was definately selling

 

[lenny]

Thanks heaps Tech/a , Selling prior to a pending lani annoucement cant be good,

Regards
Lenny

 

[roland]

Correct me if I am wrong, but it looks like the sellers in IFN are reaching exhaustion. Seems like every test of sub $0.51 - $0.495 is producing less and less volume. The daily range is tightening and the depth is nearing equilibrium.

Add to that, that we have touched an all time low of $0.495

 

[tech/a]

Correct me if I am wrong, but it looks like the sellers in IFN are reaching exhaustion. Seems like every test of sub $0.51 - $0.495 is producing less and less volume. The daily range is tightening and the depth is nearing equilibrium.

Add to that, that we have touched an all time low of $0.495

Its at an important Support level.
While selling at this level is lacking support buyers aren't exactly stumbling in at this point snapping a bargain. (its not seen as a bargain rather --currently-- seen as fair value.)

It does at this level offer a low risk entry with a tight stop available.
But trading below this level would be seen as very weak.

Would like to see a strong wide range bar boosting price away from the support area.

So while not definitive in analysis at this point not a crazy entry point either.
Risk can be well managed.

 

[roland]

Thinking about SDL, we are getting close to a 2.5 year high. One notes a minor reversal on a high volume spike back in September 2010, then a fall off in volume with a 3 week consolidation period on reducing volume. Since then we have a second longer consolidation period, then interest picked up again mid December.

Looking previously at a longer period of history, there was a big sell off at $0.515. Of course no one can really know what will unfold, but it's hard not to think that $0.515 could be a resistance point.

I guess a warning sign would be a pattern similar to the one indicated at the start of 2nd week Sep 2010. Looks like a gap up with high volume closing lower on the day.

Interested in thoughts on how a reversal might be forecast based on the charts and volume example posted.

 

[tech/a]

Rolond

There are a few things I look for (in any time frame) when price nears a resistance area.
Its pretty common (In Futures) to see stops placed a tick or 2 above and below the resistance,so you'll see an increase in volume--the question is whether that volume will be greater than selling OR Exhaust selling.
You wont know for a few bars.

For stocks its a little easier.
Volume will either exhaust or push through the resistance area without the added pressure of short stops (generally).
So I look for either a gap through resistance--a wide range bar through resistance or any trading through resistance which ISN'T accompanied by very high volume.

 

[roland]

Correct me if I am wrong, but it looks like the sellers in IFN are reaching exhaustion. Seems like every test of sub $0.51 - $0.495 is producing less and less volume. The daily range is tightening and the depth is nearing equilibrium.

Add to that, that we have touched an all time low of $0.495

Interesting day, could see the sellers come in as IFN hit $0.555. The volume bar on the chart shows the sellers happy to offload, but we still ended up on a high for the day. Looking at the volume at $0.495, one can assume that there are quite a few strong holders that may follow the pack and dump on any sign of weakness.

I suspect that we may find some resistance here at $0.555 - $0.56, in fact I have a sell order sitting at $0.56. The depth has certainly swung around and the buyers are stepping up to the plate. If we can get enough volume tomorrow we may see the sellers get over powered.