Normal reaction or reversal ...

[Schmuckie]

... how to tell the difference?

Can anyone provide any clues to newbies on how to tell the difference between a normal reaction and the beginnings or a stock's reversal?

I recently sold off a junior stock in Canada's very frothy potash market when the market seemed to be getting way too overheated and it started to sound like the big guys' exit strategies getting to work (i.e., "buy this stock because I want to get out"). When the stock had a reaction, I sold to lock in profits, not sure if the potash market was about to tank. As it turned out, the stock still had a few legs to go.

While I can't regret making a profit, are there are any simple, technical ways of looking at it, especially for someone who is just now learning technical analysis? (I promise, I'm studying hard, especially volume-spread analysis.)

Many thanks for any help.

 

[tech/a]

VSA is where you'll pick it up.

Reversals on Volume V price coming off without volume is a significant sign.

All high and lows particularly spikes are tested.Its the reaction to price and range on the test which gives evidence of whats happening in a move.(Or not happening as the case maybe.)

Here are some charts which I attached some intense VSA to for analysis discussed else where.These were compiled from days to weeks ago.
Note VSA analysis is only valid for each individual bar upto 4 days forward.

Just go to the charts and see how the analysis panned out.

I present this as a look at VSA analysis NOT a showcase for my own analysis.

The charts in order are.
FXJ
CMR
ACS

 

[Schmuckie]

So, if I understand this correctly, it's HIGH volume on a DOWN day or days (meaning more sellers and not even buyers to bring the price up), followed by a test by the market makers with LOW volume on an UP day (few buyers want to go higher), then it means a trend reversal may be in the cards.

Or do I have this backwards?

You'll have to excuse my slowness on this, it's not something that comes naturally to me, so I really have to work at it.

 

[tech/a]

Master The Markets.
E book
Tom Williams

Google it.

Start there then look at 1000s charts.

 

[julius]

Tech,

Here's a question I have...

On the FXJ chart you've labelled: - "Low volume rejection of high/No Demand." If prices are relatively higher than they have been, then rationally we would expect less demand, but we would also expect an increased supply response because of the higher prices - which, according to VSA, would be indicated by higher volume. Logically then, the bar is more indicitive of 'no supply', than it is of 'no demand'.

The same applies for the UP bar you have labelled as "Low volume, no demand".

From my perspective it seems like the argument about volume is circular - you could argue the significance of volume either way (demand OR supply)

 

[stargazer]

Hi

If you want to go slowly insane then do the VSA manually. From what i have read and seen i would use the software if i felt this was the way to go. Always easy after the event.

Cheers
SG

 

[tech/a]

Sorry been out all night will answer in the morning.
Easier than most imagine.
If you have a look at the charts Star you'll see that the analysis was spot on after the time the analysis was done.
Thats why I posted the charts the analysis ended on each at the last notation.
Then look at the price action that followed.

 

[Schmuckie]

Master The Markets.
E book
Tom Williams

Google it.

Start there then look at 1000s charts.

I've read Master the Markets and also downloaded and read the material from stockcharts' chart school. As this is all so new to me, I've actually started to confuse myself because of so much information coming at me all at once. I'm sure there's other new enthusiasts out there confronting the same problem. My plan is to re-read all of these materials. Always have been a bit thick on anything to do with math (I can absorb law like a sponge), but I eventually get it - but not without having torn my hair out in the meantime.

I also have to take this opportunity to thank everyone on ASF for your patience with the beginners. Of all the stock forums anywhere in the world, ASF is far and away the best!

Cheers

 

[tech/a]

Tech,

Here's a question I have...

On the FXJ chart you've labelled: - "Low volume rejection of high/No Demand." If prices are relatively higher than they have been, then rationally we would expect less demand, but we would also expect an increased supply response because of the higher prices - which, according to VSA, would be indicated by higher volume. Logically then, the bar is more indicitive of 'no supply', than it is of 'no demand'.

The same applies for the UP bar you have labelled as "Low volume, no demand".

From my perspective it seems like the argument about volume is circular - you could argue the significance of volume either way (demand OR supply)

A common and good question.

Infact its THE question to ask and your perspective is one that most everyone holds as I did sometime ago.

The concept is very simple yet requires a change in our "Conventional/logical" thinking---once grasped its like turning the light on.
Each chart becomes a very clear story of whats happening within the stock.
Further you can then break down the internals of bars.
By this I mean if you have a Weekly bar you can read the 5 days of price action to see whats inside the Weekly bar---eg is it likely to continue or fail.

Further again you can if you have Realtime data break down the daily bar into 30,60,120 min to see whats inside that bar.
I use 120 min as any smaller and volume has little significance---unless its a large cap or liquid future.

Specifically now to your question.
The circular arguement.

Price can only move forward if one of three things happen.

(1) Sellers dry up at a level. Allowing price to advance higher.
(2) Buyers swamp sellers,price moves forward as buyers chase any sellers at higher prices.
(3) Both 1 & 2 this is where you see large volume and range spikes.

Price can only fall if one of three things happen.

(1) Buyers dry up at a level,price will no longer be supported and will fall.
(2) Sellers swamp buyers,price moves lower as sellers chase any buyers at lower prices.
(3) Both 1 & 2 this is where you see large range and volume spikes.

Every high will be tested particularly spikes
Every low will be tested particularly spikes.

You must ask is volume and range showing me strength or weakness in any move towards and at points of test.

Big sellers must sell into strength (If they dont they just swamp buyers and force price lower very quickly which is costly to the big seller). Until they go or buyers swamp all there is to sell at a level price will NOT advance.
Exactly the opposite in pulling up a falling move.

First step is to grasp this from here you'll be able to begin to "read the tape"
accurately.

 

[Timmy]

Tech - this is great stuff thank-you ..... great explanations.

 

[stargazer]

Hi all

Thanks for that info Tech/a and by the way i wasn't having a dig at you in regards to after the event. It was the area i find difficult at this stage in real time but am better at predicting it after its happened, if thats makes sense.

Still trying to grasp it all in real time and what time frame is better, is this a 3-5 minute chart type operation or can one use a daily chart to predict next days possibilities.

Cheers
SG

 

[tech/a]

Star
You need range and volume.
In ASX stocks anything under 120 min is pretty un reliable I think unless its a Blue chip.
Some pennies are un reliable on Daily.
Remember each bar can only give us an indication of the next 3/4 bars in any timeframe

Post up some for practice.

 

[stargazer]

Hi all

Thanks Tech/a i don't know how to post a chart on the forum not sure if i can do it from an E trade platform.

But just asking in relation to OXR the chart today indicated the Volume was near the average 25mill. The close was on the low side of the bar but the bar was not long so the selling pressure may be easing. I would say from what i have noticed the last few bars it was weakness but easing and could turn.

How would you view something that fell through its 52 week low?

Is this ok to use for entry and exits or other indicators be used in conjunction?

Cheers
SG

 

[tech/a]

Star.

Its all part of the analysis process.
Bottoms "Normally" dont form in a V.
OXR as your example comes from a background of great resistance.
Its fallen through any support it had in the past 52 weeks.

I personally look for exhaustive volume in the end of falls then a period of basing. Its not clear that exhaustive volume has been finalised.recient High volume and range indicate a possibility.
There is no basing to speak of yet.

First signs will be low volume tests of the low.
Perhaps high volume and little range followed by a low volume up move indicating no supply.
My bet would be ranging and basing for a while.

To hard!!

Not one of interest for me.

 

[stargazer]

Thanks Tech/a

I personally look for exhaustive volume

What do you mean by the above.

cheers
SG

 

[MRC & Co]

Thanks Tech/a



What do you mean by the above.

cheers
SG

Volume drying up. Decreasing, to the point where little supply exists (nobody willing to sell at the lower prices).

First signs will be low volume tests of the low OR high volume and little range (signalling accumulation, the 'smart money' buying in).

Julius makes a good point, but it's as Tech states here: Each chart becomes a very clear story of whats happening within the stock. - maybe not clear for me, but individual bars have to be put into context of the overall chart and where prices are currently oscillating. Individual bars can then be analysed by spread, volume and close.

Great answers though Tech, good to enlighten people on one of the few techniques I find useful.

Note: I do not use tradeguider, so my analysis is probably not quiet as accurate, I just get the general feel for volume and price.

Can't say I am familiar with any of Techs charts or what they have done since posted, but of them, I would personally trade the last two if anything. Both show more weakness to me. The first one is a bit messy and I only like trading clean swings or patterns, not to mention, volume is a bit too high, considering spreads are not narrow, not a good sign IMHO. Also, don't like that one test bar, on high volume, closing in the higher portion of the range.

 

[tech/a]

Thanks Tech/a

What do you mean by the above.

cheers
SG

Hope this helps
CLICK ON THE IMAGE TO EXPAND.

 

[stargazer]

Hi

Thanks for that tech/a and mrc and co much appreciate your replies. VSA is certainly an interesting subject. Just go to keep looking at charts and take a stab at it and see if i am correct. Just starting the try and find some order in the chaos of a chart with VSA.

Things i am not sure about?

What is background weakness?
How far back does one go for support levels?
What is the ideal chart where a reversal is most likely with VSA.

Tech/a I think you mentioned that CUL was showing strength based on VSA yet hasn't done much still trying to work this chart out as it promised so much but has been quiet. NOT CRITICISING your input but my understanding of it.

Does the VSA also assist in the retracement dilemma eg. price goes up and then retraces back....
I have sold and price has then shot up for a 10 bagger and i missed out
I have kept and price has plummeted.
Any clues here?

Cheers
SG

 

[tech/a]

Ive posted many charts so dont know when and if I did some VSA on CUL.
I'll look tonight where I have all my noted charts at home.

In the meantime have a look at this 120 min FLX chart and have a look at the exhaustion of selling between 5th and 13th when the breakout came you could be confident it was going to hold.

Although I hate hindiste analysis this is a good example.
I'll see what I can find in realtime.
Pickings are slim at the moment.
Although the current basing of FLX from the 3rd is showing setup potential.
Low volume consolidation after the strong rise from the 3 rd to 7th
Chart attached is a 120 min also.Note the exhaustion on the 3rd!

 

[stargazer]

Hi
The link takes you to the chart
https://www.aussiestockforums.com/forums/attachment.php?attachmentid=21461&d=1212654492

Cheers
SG