[VSA] Volume Spread Analysis

[Anonymous]

This should go with the previous post.

Just an example of a Test in a Rising Market. As the name implies, you wont get in at the start of the move, but you do get in when the path of least resistance is clearly to the upside.

[TinGull]

Right after a nice bull flag was that first test

[sleepy v2]

jj,

What happened with Fedex? ... #804

[jjthetrader]

	Quote:	sleepy v2
	jj, What happened with Fedex? ... #804

I haven't updated my daily stuff yet but as of yesterday it is continuing down. Don't know what's in store for this one.


PP, in one of your earlier posts you said you put a blue dot if a certain condition is met and a red if another. What were your conditions?

[jjthetrader]

Here's another "what if" to help me understand background.

In the attached chart we see what could be hidden potential buying. We dip below S1, possibly to catch stops, and rebound back up to it where we see a no demand show up.

Is this a polar bear in Hawaii and is the market resting before a push up or is this a Polar Bear in Alaska and that hidden potential buying was not buying at all.
PP, since you take trades in this area what would you do?
Sorry to ask so many questions but I want to make sure I'm reading things correctly. You guys have been VSAing longer than myself so thank you for sharing.
thanks
JJ

[TinGull]

I wouldn't say theres potential hidden buying in the bar you've got marked. The spread wasn't outrageous...volume sure was and it closed just off it's lows...at support. Next bar was down showing that the effort to move down indeed gave us results. That's the biggest thing I watch for. Is the effort giving results? When you see no results from the effort, thats when the hidden buying becomes apparent. In this, I see price that broke a support level on significant volume and continued lower and is now retracing.

Take note of the volume that produced results. That last bar doesn't have nearly enough volume to be able to push through that supply left by the big volume bar.

Just my opinion...

[MrPaul]

	Quote:	jjthetrader
	Here's another "what if" to help me understand background. In the attached chart we see what could be hidden potential buying. We dip below S1, possibly to catch stops, and rebound back up to it where we see a no demand show up. Is this a polar bear in Hawaii and is the market resting before a push up or is this a Polar Bear in Alaska and that hidden potential buying was not buying at all. PP, since you take trades in this area what would you do? Sorry to ask so many questions but I want to make sure I'm reading things correctly. You guys have been VSAing longer than myself so thank you for sharing. thanks JJ

I think it is important when looking at charts like this to remember all the fresh supply at the top of the range has to become demand at some point but not necessarily accumulation demand. Therefore, instead of framing it as "hidden buying" framing it as simply "short covering" could help give a more precise picture.

What happens next is what is important and what will help indicate the next possible trade. One thing has the highest probability of happening in my opinion. That is...The market to fall (breaking the recent bar(s) low)

NOW...

Does the market fall on light volume test the recent lows? bullish

Does the market fall on heavier volume with spreads wider and closing at or near the lows? bearish

etc. etc.

[jjthetrader]

Thanks to both for your comments. Here's a chart of what happened after what I posted earlier.

Tin, I overlooked Effort, you're right.

I thought any wide spread down bar on ultra high volume closing off the low was hidden POTENTIAL buying and once you see the potential you then wait for confirmation.
But if I keep waiting and waiting for confirmation, where the heck do I enter my trade (without the wipsawing catching my stops)?
I suppose the bar after the no demand bar signals a continuation and I chould enter there eh?

Thanks for all the input.

[Anonymous]

TG.

While my post was to show a difference between a Test and a Test in a Rising Market, you brought an interesting point to light.

But first. Note the quick (and tradable) pop in price action after the Test in a Rising Market. This type of Test benefits from BACKGROUND strength which includes a trend in place as opposed to a change in trend.



Now for the really cool thing you alluded to. Note that I have drawn another black line to complete the pennant formation. Also note that we have a Long Shadow that forms a resistance zone and we get a No Supply that is completely within that shadow. The bar after the No Supply breaks the pennant, signaling a long trade for the price pattern watchers. VSA and WRB & Long Shadow analysis is doing the same.

[TinGull]

	Quote:	jjthetrader
	I suppose the bar after the no demand bar signals a continuation and I chould enter there eh?

Yup, you got it