Volume/Range/High Low and Close--reading and application

[cuttlefish]

continued ...

2:50 - moved down through the 28:30 level. Most of the volume in the queue ran away as it touched it. 28.30 level (and my daily

28.32 level) should now act as resistance. This is a good supply - moderate supply pushed it through the 28.30 level and we haven't seen much renewed demand here. This is strengthening the viewpoint that there is a genuine lack of demand. With the close coming in we might start to see a bit of supply come in.

2:55 Ok its moved fairly decisively down through this 2.32 point (currently sitting on the 28.30 level on the bid) so we'll move our trailing stop down to 28.37 as mentioned above.

2:57 - it moved back up through 28.30 and touched 28.32 again on prety small volume - this will be a good test of this resistance now.

2:58 - back down through on a wide ranging red bar with an upper tail - with a bit of volume - bar closed at 28.29 - ths is confirming that there is little support now at this level and its becoming resistance.

2:59 - this is nice - a green bar same range as previous down bar closed on its high on good volume (more volume than previous) - so demand appeared but failed to beat supply - supply is starting to show its hand.

3:00 - no range moderate volume price 28.29 - still confirming some supply and some demand and supply winning.

Checking 5 min bars - the 2:50 p.m. 5 minute bar is showing nice volume and really showing this move down through that support area - was potential stopping volume but subsequent bars have shown it was supply and supply overcame demand.

3:01 - back to 1 minute bar. 3:01 - another high volume test of the resitance point but failed to close above it (closed on 28.30).

3:02 - now made it through the resitance point and closed on 28.31(the 5 min bars will be showing this differently and will be probably starting to show this as possible demand coming in).

3:03 low volume low range no demand no supply - demand isn't appearing as it moves through this resistance.

3:04 - down through the resistance again on moderate volume - the resistance didn't turn into support - there is still no real demand. Little bit of supply but not massive took it back down through here and has moved it down to 28.26 - this is good for a continued move to the downside (imo) - battle over support by the buyers was a weak battle and easily won (and now has been won imo - that resistance at 28.30 should start to become stronger).

3:05 - moving down on volume now - the supply is starting to appear - close at 28.24

3:06 - good volume - high volume bar and down to 28.20 - look out for demand entering but just looks like supply starting to appear properly to me.

3:07 - more down moves on volume - range not as large - volume the same still getting supply but also demand.

3:08 - some demand apearing but after such a quick move down its to be expected - moderate volume and only just matched supply (test to the downside on moderate volume) - possible short term reversal here but not enough volume to signal a turning point to me.

3:09 - this is more positive stuff - moderate volume bar still at these lows no demand entering even though price has spiked down and supply still continuing

This spike is good and possible capitulation so this might be a good point to take a profit if we see any reversal but while its still moving down we'll stay in it.

3:10 - lowest close on high volume - possibly seeing demand come in but its been low volume all day - it could just be supply amping up a bit.

3:12 - demand starting to match supply.

3:13 - supply won the previous bar but volume was high - coming into possible reversal here.

3:14 - green bar - lower volume than previous down bar and full range is higher - possible reversal now - demand beating supply.

3:15 - this is an important bar - its a down bar, but volume is lower than the down bar two bars back and its failed to breach that earlier bars low - the next bar will be significant.

3:16 - no demand - no range bar on low of previous - short view stil intact.

3:17 - little downside test didn't bring any supply or demand.

3:18 - upside test - big volume big range - shows demand but also supply there - closed on high, but will demand follow through.

(stop moved down to the 28.32 level by the way because we're well below it now - and we're also looking for an exit on reversal).

3:19 - no range, no volume - no supply came in at this higher level - demand starting to appear.
Close trade. 3:21 p.m. 28.19

Trade closed but just following through for a bit - 3:25 p.m. - bit of supply here but not much and subsequent bars showing no supply. No re-entries here at the moment - this could have reversed - we're near the close of day as well.

 

[cuttlefish]

And interesting addendum is that CBA closed at 28.32 which is exactly on the resistance line that came from the daily charts, as mentioned inside the log.

 

[The Edge]

Sunday 11 January 2009

Ahhhhhhh, price and volume, aka market activity, the best source of a market's
behavior. It draws me like a moth in heat to a bright light.

I trust tech/a will provide more information to his charts. Given my inabiility to
post any, I will piggy-back his last chart of CBA provided in #1 above. All of my
references will be to that specific chart.

The most important piece of information one can have, and this can never be
overemphasized, is to know the trend...for sure in the time frame in which one
is operating, but knowing all higher time frames, as well. Why is this the
singlemost important information?

It enables one to put the market, [stock, futures, etc], into a context.
Simplistically, [and ideally], results will be best when all time frames are in sync,
directionally. Then, making decisions to buy or sell, going with the direction of
the trend, is easier, and anyone going against the trend takes huge risks.

These comments do not apply to time frames under 10 minutes because those
lesser time frames contain a lot of 'noise,' and are less reliable. Those who
trade in smaller time frames, cheers!....they just are not for me. The mention
of using 10 minute time frames would be to hone in on a specific entry chosen
from higher time frames, but usually, 60 minute or 15 minute time frames will
suffice.

cuttlefish poses an excellent question, above: [in statement form]

> A low volume bar can be interpreted as 'no demand' or a 'lcak of supply. No
> demand is obviously bearish, lack of supply arguably bullish [but not always].

This is why comments were prefaced with the importance of knowing the trend.
In an uptrend, demand has already been established. It is supply that has to
assert itself, prove itself. Therefore, a low volume bar is not 'no demand,' for
demand is already proven and present. it does not have to show up on every
bar. That same low volume bar does not have to mean lack of supply.

Caveat: Volume interpretation is an art, not a science, and any attempt to
"mechanize" it would be a huge mistake.

What was omitted was the inclusion of the close on any given bar. The bar's
range is the 'battleground,' and the close determines who won that bar's battle
within the overall war. [trend].

To the chart, CBA. Being an Australian stock, I do not have access to higher
time frames for analysis. I would want to see a Quarterly, monthly and weekly
chart in order to put this stock into a more cohesive context. Absent that, CBA
has been in a protracted nine month trading range from which price has declined
and is now in another, lower price level, two month trading range. One can
easily conclude that all time frames are down, and within that context, there
is absolutely no reason to be a buyer.

Starting with the high volume spike, between 15-22 December, [print out a
chart to follow along with this text.], the bar is a wider range with a close near
the low. Mention was made in another thread that high volume bars can be
climatic...not trend changing, necessarily, but at least stopping action for a
while. This activity is a red flag. One would expect continuation to the downside
next day, given the identified trend is down, and volume was high. What happens
next day? A small range bar with a slightly higher close...but...note the volume...
it is relatively high.

Here comes the art form explanation for that small range bar, the one following
the high volume spike day. It is an inside day, and the close was just under
mid-range of the bar, generally indicating sellers won the battle that day. But
did the sellers actually win? I think not. In fact, it looks like demand is sneaking in.

Why?

Note the still very high volume. Strong volume in a downtrend where supply [sellers]
is supposed to be in control, yet, with all that strong volume, price closed higher.
Actually, for that to happen, demand [buyers] had to be present. Otherwise,
the range would have extended lower.

Now, that is just part of the story. Look at the two bars between 17-25 November.
Good size ranges with high end closes, evidence of demand, and the volume was
relatively high. These are signs of demand in a market heading to new lows.

Next is the wide range bar, low end close of 9 December. It looks like all supply:
low end close, high volume and all, but that seeming supply activity did not push
price into lower territory from those 'damand' bars just mentioned.

Then, the next bar, after 9 December, is a very small range, low end close with
the highest volume in weeks. The low of that high volume day held the lows from
mid-November. The sharp increase in volume actually represents demand [buyers]
overpowering supply [sellers].

How do we know that?

The high volume, in a defined down trend, should have extended that bar's range
lower, if supply were in control. The reason why that bar's range is so small is
because demand is absorbing all the offerings from sellers, thus keeping the range
from going lower.

Who would be buying? Smart money, strong hands. Who would be selling?
The public, weak holders, tired of sustaining losses, wanting to stop the bleeding,
as it were.

This larger picture, including other surrounding activity, puts that single spike
volume bar into a more meaningful frame of reference, instead of viewing it in
isolation. It takes time for market trends to turn around. The last five bars are
smaller ranges on declining volume, evidence of a lack of demand.

There is overhead resistance around 30, stronger resistance around 34, and huge
resistance from the previous trading range, between 38-45. Is there a conclusion
to be drawn?

Cover short positions. This stock is not turning around any time soon. It could take
years for it to develop a base from which to work higher, and that identified
resistance overhanging the market will stem any rallies, for now and for some
time to come.

Cheers!

 

[tech/a]

C/F.

Just saw your post and havent read it.

Just very quickly this is CBA 5 min chart 5 of your bars to one of these.
Note how much easier it is to read!

Anyway I'll comment more tonight after an hrs reading!

Profitable trade all the same.

Click on chart to expand.

 

[tech/a]

Hi C/F, exactly what was bugging me about the interpretation as well .... good question .....



And an equally good answer thanks Pete .....

Thanks Pete.
Edge also gives some great insight.

I think Tech mentioned that with VSA the preceding 3 (??) bars are the ones which give real significance ...... Just wondering if that is true across all time frames?

Yes.

For eg. Three 1 Hour bars = Thirty six 5 minute bars ....... so if we are trading using VSA off 5 minute bars, we should theoretically be trading very short term?? ..... otherwise we are only getting a miniscule part of the picture ?? .........

No not really there is always another bar and or another timeframe.

So far I'm forming the opinion that VSA appears to have more relevance over wider time frames unless we are scalping etc ....... and the historic nature of the stock/index/whatever we are trading is what we really need to focus on first ......

No and Yes.

Cuttlefish.
I really think a 1 min bar chart for analysing CBA is to short. Not enough going on in 1 bar. FOREX maybe CBA no. But good practice though.

EDGE
Excellent contribution thanks.

 

[tech/a]

Here is a 5 min SPI chart sent to me by another trader--thanks DON.

Some good alerts here and some nice data to practice on.
Click on the enlarge.

 

[cuttlefish]

Sunday 11 January 2009

... etc.

Edge - cheers for the comments - very well explained and your justification of your analysis makes a lot of sense. I did have a few comments/questions on your analysis which I'll ask in another post if I get the time.

 

[cuttlefish]

Cuttlefish: Interpretation is helped by knowing what is in the recent background. If the market is showing signs of strength (SOS) then a low vol up bar is probably lack of supply. If there are signs of weakness (SOW) then a low volume up bar is probably no demand.

Whenever you notice a high volume bar look to the left of the chart to see if the current price level has been support or resistance earlier. If so then SOS or SOW can provide low risk entries.

peter - cheers for the clear and concise response - this is very helpful and makes a lot of sense. (and Edge has illustrated this in his example as well).

 

[cuttlefish]

I really think a 1 min bar chart for analysing CBA is to short. Not enough going on in 1 bar. FOREX maybe CBA no. But good practice though.

Yeah tech I agree with this - most of the bars have little meaning and the distribution of small amounts of volume across the bars is also often random.

So if watchinig the one minute bars there is a lot of ignoring going on and also a lot of mental consolidating of bars and also moving out to 5 minute bars a lot. But in spite of most of the 1 minute bars being irrelevent on their own - when action does start to occur the 1 minute bars can definitely give the pointy-end signals and be worth following imo. So the majority of the time they aren't giving much away but at the right point in time they are extremely relevant.

For the type of trading I'm doing and the positions I'm taking I'm not sure focusing on such tight timeframes makes much sense and if I'm going to spend the energy doing that then I should be trading in those timeframes. Because of this I've started to add some day trades as well as I gain more confidence that I'm taking entries/exits that aren't just random hunches.

I also consider it important to analyse how the market is reacting to changes in the depth alongside the bars. I'm not interpreting depth at 'face value' of course but but watching how the market is reacting to depth manipulation and tests that are being carried out by the market players.

At the moment I'm really just experimenting with a few different things and trying to get a feel for reading the price action as it plays out and seeing what things seem to work/help with that process.

(Basically getting some of that 'screen time' that TH and others talk about).

 

[It's Snake Pliskin]

Is ths thread intraday only? Or is daily ok?

 

[The Edge]

Friday 16 January 2009

Any and all time frames.

 

[lindsayf]

Hi..this may be a bit off topic..but maybe not...
I am interested in the degree to which tick volume (Forex, futures indices) can be interpreted using the same principles as time interval data. I have attached 2 images of the ES futures index for the part of the day. One is a 1 minute chart and the other a 500 tick chart (500 chosen as scale is similar to minute chart)....Note how different the volume characteristics are. Quite different..I would argue that based on this, the time interval charts provide a much clearer basis for VSA..but that with familiarity, and understanding how tick volume works..that it can also be applied...but very interested in others views. Any comment?

cheers

 

[tech/a]

Id be using a time related chart not a set number tick chart.
You want to be able to see the flow through the timeframe.

Just one thing on your chart
The green bars you have marked showing clear demand are actually clearly showing the opposite,as the bars follow ig the high volume bars are down indicating that those high volume bars are actually supply.
EXCEPT for the last green arrow which is correct and a great signal.

 

[peter2]

That's curious, Lindsay, how can the open/close's always be the same price?

 

[lindsayf]

oh..initially I didnt understand yr question....the bars show close only

 

[barney]

Id be using a time related chart not a set number tick chart.
You want to be able to see the flow through the timeframe.

Just one thing on your chart
The green bars you have marked showing clear demand are actually clearly showing the opposite,as the bars follow ig the high volume bars are down indicating that those high volume bars are actually supply.
EXCEPT for the last green arrow which is correct and a great signal.

Just curious Tech ... the first green bar is followed by a similar pattern to the third green bar ..... ie. The pattern looks to change to the upside ..... how do we determine not to take the first trade, but that we should take the third trade? Cheers.

 

[lindsayf]

Barney, tech , is referring to the top chart..and you the bottom...yes?

 

[Cartman]

time interval chart and tick chart tell u the same story when the bigger volume comes in ----- if a sharp price change/reversal is accompanied by big volume --- its either a bottom --- or the deep pockets are gona milk the swing traders by dumping more volume to the opposite side ( initial trend direction) ----

how do we know which one it is ? ---------- in a word 'Momentum' --------- is momentum always correct? ------- definitely not --- but its yr best friend

 

[tech/a]

Barney, tech , is referring to the top chart..and you the bottom...yes?

Yes.

 

[barney]

Barney, tech , is referring to the top chart..and you the bottom...yes?

Hi Lindsay, to be honest I have trouble getting a handle on volume spread analysis .... To me both charts looks similar when looked at in a short term time frame. The tick chart obviously might throw the odd higher range bar in, but the cumulative volume is still indicative over a given time frame .... I think that is what Tech is saying re using "time" as a better scaling scenario ?? ... but I'm only guessing. Cheers.