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Wanted to post a pic of a beautiful set-up with not so beautiful results. 
This chart actually shows two set-ups, but I will just focus on the first one. I hope some other VSAers will tell me what they see and what they would have done (or not done) in this situation.
Let's start at the beginning.
First thing we see is a ultra wide spread candle on ultra high volume. Markets don't like this type of candle. Unless it is tested immediately or unless there are tops to the left, in which case the BBs could be pushing thru supply (absorption volume). The BBs are willing to buying into the selling because they expect prices to rise. That was not the case here.
This WRB on ultra high volume starts the set-up. Note that the next candle is up. However the volume is lower and the range is narrow. This is an indication that something is holding a ceiling on price: supply is overhead. We also note that the WRB did not close on its high. Supply must have entered on that bar.
The next candle of note is the Doji. While it is not within the "required" area, it is a very key candle. It is a narrow range bar, with a lower low, closing up and closing near its high. This is a test. But the volume, while relatively low, is up. In short, the test fails. The very next candle is a Dark WRB that closes lower than the low of the test bar. This is not at place to enter for me as the test is not within the correct area, nor is the dark WRB engulfing. However, this is a clear (up to this point) sign of market weakness.
A few candles later we get another test. This is a better looking test in some ways. The range is narrow, the close is on the high and the close is down from the previous bar. To be ideal we would want to see a lower low, however. But check out the volume. It is less than the previous two bars but still high. Another failed test. A failed test means price MAY still rise but any rise should be muted by the latent supply in the market. Price does rise a bit.
Now we have the key candle(which also happens to be a Doji). A higher high, closing up and closing near its lows on volume less than the previous two bars. This is an up thrust in the form of no demand. We have seen weakness in the background in the form of two failed tests and an ultra high volume wide spread up candle. Notice where this up thrust occurs. It is with the WRB support/resistance zone. More specifically, it is within the area overlapping the white WRB and both a Long Shadow (upper) and Long Shadow (lower). This is the area between the cyan lines. Short on the close of this candle. Initial stop just above the S/R Zone.
The stop is moved to the open of the dark WRB only after the appearance of the second dark WRB that closes lower than the first. This second dark WRB finds resistance at the bottom of the S/R zone.
Price moves up. We see a couple of no demands prior to a white WRB that closes on our stop level, taking us out of the market with a small gain. 
Stepping back for a moment, it is clear that the white WRB on ultra high volume represents some kind of change in the supply/demand dynamic. Which is why it, and they in general, make good zones for entry. Although that is only one of their many uses. |
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Hi CW,
I think that was a good reading of the chart, and certainly good trade management. Maybe the volume on the WRB wasn't ultra high? (I don't know this market). Volume didn't pick up when it approached the low of the WRB compared to the first reaction down (between the two failed tests). Given the data on the chart, that's about the only clue I see. What was to the left of this?
This is an interesting chart. Maybe you can post another chart with more data? It was still struggling later in the day at the 15050 area.
I don't think
VSA addresses the idea that WRBs can be support, as indicated on your chart. Others use them this way too. It might be a question for Williams and Manby?
Eiger