Very interesting chart here.
I makes these posts to help me learn as much as anybody else. I am really starting to see the relationship between High/Ultra High Volume areas and subsequent Low Volume signs within that area. If I had any doubt about the importance of volume, I certainly don't now.
Many of the charts are repetitive but there are two main reasons for that:
1. Theses things repeat day after day and on all timeframes.
2. Pattern recognition.
At any rate, here is a really cool chart with much of the same AND a new twist.
First, we see a down dark candle line on Ultra High Volume. But the next bar is up. Therefore there must of been some demand (buying) on that dark candle line. That next up bar, in fact, has even more volume and closes off its highs. We know that the market does not like wide spread candles on High or Ultra High Volume. At this point, we also have a white (close>open) WRB. Thus by extension, we have a Support/Resistance zone. Remember, WRBs represent changes or shifts in the supply/demand dynamics in the market.
The bar following this WRB is up, but the volume is less than the previous two candles and the range has narrowed. The candle following the No Demand is down. Now we can see that the WRB did indeed have some supply in it. (while this is after the fact, if we step back and look at what price did following the WRB is move sideways. Which means there must of been supply entering on the WRB. But this after the fact notion only confirms what we see during the fact.)
Note that the bar following the No Demand is itself a No Supply bar. The volume is less than the previous two candles with price closing lower than the previous bar. On the very next candle we see a test. This test, however, is not a low volume test but rather a higher volume test. As usual, we look for the confirmation of the test to come one to two bars later. Here it does indeed come on the next bar. But this next bar is also a No Demand bar. It has a smaller range, closes higher, and has volume less than the previous two candles. At this point I would depart from
VSA just to note that this is not a High Close Doji as the close is equal to the high of the doji, not higher.
Before going into this bar a bit more from a
VSA perspective, let's jump ahead two more candles. We see a narrow bar that makes a lower low, closes in its upper portion on lower volume This is a test. KEY THINGS:
1. This second test has a narrower range than the first test.
2. This second test has less volume than the first test.
3. This second test does not make a lower low than the first test.
4. This second test comes within the range of a high volume candle, more specifically, within the body of the High Volume white WRB.
This second test is confirmed the next candle by a bar that closes higher than the close of the test bar itself. NOW WE HAVE A HIGH CLOSE DOJI, as the close is also higher than the high of the doji test candle. Note that the volume is higher than the test candle. In fact, the volume is very high on a wide spread. But this time we have PUSHING THRU SUPPLY (a sign of strength).
The difference in the two confirmation candles after the respective test candles; Activity. Professional Money was more active on the second as evidenced by more volume than on the first.