[VSA] Volume Spread Analysis Part II

[Sledge]

Post #120
This post builds on post # 114.

After the up move in price what happens next?

There is on thing we want to keep in mind; we had a couple of Gaps on the way up. Gaps are usually filled. They can at times, however, act as support and resistance areas......

Let's look at the what happens when a test fails.

The first thing you will notice is a WRB. Not important to VSA but oh so telling to the rest of us. The best places to see tests, upthrusts, and no supply/no demand bars are within the body of a WRB or shadow of a Long Shadow candle.

We have our WRB in place. This creates a natural support/resistance zone. Next we see a narrow bar that closes near its high, closes equal to the previous bar, and has Ultra High volume. THIS IS A HIGH VOLUME TEST. Smart money is looking for sellers and is finding some. While it is true that sometimes the market goes up on high test, it usually does not go up far and then comes back down to re-test the area.

As always the next 1 or 2 bars need to be considered. To actually confirm the test we need to see one of the next 2 bars close Higher than the close of the test. Otherwise, we have a failed test. Notice what happens here. The next bar is down and then the bar after that is an up bar but closes equal to the close of the test bar. Now, look at the next bar. We have an up bar that closes in the middle to slightly up on relatively high volume. It is not as high as the test, but it is still high.

Up close (from previous bar), on high volume closing near the middle: This is supply entering the market. At this point, we have a FAILED test on high volume and more supply showing up. The very next bar closes on the high with volume less than the previous two bars and closes higher than the previous bar. This is no buying pressure. As it would happen, the high of this bar is equal to the close of the WRB. TG WONT TELL YOU THIS. Then we get the next bar down. From a VSA point of view, now is the time to go short.

* the test of supply has failed.
* New supply entered.
* No buying pressure.

couple that with the fact that there are gaps below and all this is happening at the low of the S/R zone of a WRB.

Now let's take a look at a test that does not fail. I would first point out that from a time of day perspective, this is not an ideal time to be entering a trade.

It all starts with a WRB.

We have an Ultra Wide Spread bar on Ultra High Volume that closes on the low. But the next bar is up. If this bar is up then there must of been some buying in the previous Ultra Wide Spread bar. WRB analysis tells us that changes and shifts in supply/demand occur in WRBs. More reasons to think something is indeed going on.

3 candles later, we see a narrow range candle that closes on its high, makes a lower low and has volume less than the previous two bars. THIS IS A TEST. Technically a possible test, as we do not have a confirmation bar yet.

Confirmation comes 2 bars later when we see an up bar that closes higher than the close of the test bar. First possible entry point, with no regard to time of day. If you missed that point there is another. We get a bar that closes on its low, has a narrow range, has volume less than the previous two bars, with the next bar up. THIS IS NO SELLING PRESSURE/NO SUPPLY.

What is nice about this bar is the volume. While the test volume was lower than the previous two bars, it was not as low as the volume on this bar. More evidence of the lack of sellers underneath. Also note that we are within the range of the WRB as on this bar. So we have a second chance entry which may in fact be the most ideal entry of all for some (leaving time of day out of the equation).

Back to the test candle. Some may note a hammer line that appears to traverse into a bullish white hammer pattern. It does not. But if you had mistaken it as such, here too, time of day should have kept you out.
120.jpg

[Sledge]

Post #121
One thing that I am very struck with is the overlap one finds in " things that are true" across various methods.

Take for example the chart below.

Notice that we have a valid High Close Doji pattern.

This pattern appears within the body of the WRB and the following Ultra Wide Spread bar with Ultra High volume. Take a look at the test bar.

VSA tells us that a test bar is when Professional Money "mark" prices down to see if there are is any supply (sellers). VSA, however, does not look at the open of the bar. But look at what we see if we do. First, we see that this bar is a doji. In candlestick terms this bar represents indecision. More over, the close on the top means price was rejected as it moved down. This is not unlike what VSA tells us.

When we look at the entire bar, what must be the way the bar played out? The bar opened up, went down and the price came up to close right where it opened. Clearly, we can see that Professional Money "marked-down" the price only to take it back up again. In this case, we have a "perfect" example of the true intentions of the Smart Money. If the open had been lower on the bar, we would of course still have a test, but the picture would be different. For example, if the open was at the low of the bar, we would still have a test, but we would not get a sense of the "mark-down".

Note that the other labeled test candle opens in the middle and closes on its high. We do see the action (mark down-price rejection) here as well.

To be clear, tests come in various forms and the key is the volume and the close. But some tests are more reliable than others. Volume plays a role here but so does the open. Tests that are also dojis tend to be the optimal type of tests. To those that use candles, this makes sense. Hammers with long shadows also make ideal test bars.

Two methods reaching like conclusions.

It should be pointed out that a test bar needs confirmation. Ideally that confirmation comes on the next bar with a close higher than the close of the close of the test bar. If that confirmation bar closes higher than the high of the test bar and it (the test bar) is a doji, well, now we have something..............
121.jpg

[unicorn]

	Quote:	Sledge
	Post #133 Gaps are filled.

Sledge THANK YOU for your effort in re-posting these.

[Sledge]

Unicorn-
Sorry, I have too many Word Docs Open at once- you are correct and I guess my time to edit my post has expired, your text for that post is indeed correct!

Sledge

[unicorn]

	Quote:	Sledge
	Sorry,

Sledge, are you joking?
THANKS AGAIN.

[mister ed]

Well done Sledge - thats a great help to all.

I had a few charts I had saved to take notes on too, these I have already forwarded to James to integrate back into the original thread if it cannot be restored, so I think with the great community effort a lot of these charts will be back on the site freely available again.

[habi]

	Quote:	Tasuki
	Check out attached chart. In this new (and improved?) second thread on VSA, I'd like to advocate that we spend a little time each weekend and analyze the major charts for the following week---maybe give us all a heads up. Here's my lame contribution for this week--looks like we have a successful test (low volume down bar, attempting but failing to go down to area of previous supply). This would suggest that maybe the January lows will hold and we'll get an up-week next week. Anybody care to shoot me down? Please feel free.

Tasuki

Yes, I had the same idea, that we see now a downmove on lower volume, but I'm not shur, if the low is already in. A look at a 60 minute chart give me different signals:

On thursday, we had first to up candles, the second with the highest volume for the last two days, but with long upper shadows, a sign of weakness. After a doji, we see two up bars, closing near the high. The first one with low volume, the second one with some more volume, but followed with a down cnadle with very high volume, forming a WRB. In the next bar we see some strenght came in and on friday another test bar.

Since I see signs of weekness and strengt it's hard to say in which direction the next move will go. Maybe it's better to wait for further signs above or below this consolidation.

[Sledge]

	Quote:	mister ed
	Well done Sledge - thats a great help to all. I had a few charts I had saved to take notes on too, these I have already forwarded to James to integrate back into the original thread if it cannot be restored, so I think with the great community effort a lot of these charts will be back on the site freely available again.

Ed-
Apparently PP doesn't feel the same-- here is a PM I got from him:
STOP TRYING TO SPEAK FOR ME

--------------------------------------------------------------------------
YOU AR NOT ME. USE YOUR OWN CHARTS AND OWN EXAMPLES. IF I CAN I WILL BE DELETING THE TEXTS AS WELL.

My witty reply was unable to be sent to his mailbox (full!) I'm sure with the combination of him deleting his work and sending sweet messages like this to all participants re-posting his charts, his mailbox is completely swamped with demand for answers with little supply to go around.

[habi]

	Quote:	Sledge
	YOU AR NOT ME. USE YOUR OWN CHARTS AND OWN EXAMPLES. IF I CAN I WILL BE DELETING THE TEXTS AS WELL.

Let's look forward. PP made a great work in this forum. It's a pity that he deleted all the charts and nobody knows the reasaon, it seems to be a big probelm. But I think, we should respect, that he don't like to see his charts in this forum. I hope, that the forum responsibles find a way, that he comes back to this forum.

[MrPaul]

	Quote:	Sledge
	Ed- Apparently PP doesn't feel the same-- here is a PM I got from him: STOP TRYING TO SPEAK FOR ME -------------------------------------------------------------------------- YOU AR NOT ME. USE YOUR OWN CHARTS AND OWN EXAMPLES. IF I CAN I WILL BE DELETING THE TEXTS AS WELL. My witty reply was unable to be sent to his mailbox (full!) I'm sure with the combination of him deleting his work and sending sweet messages like this to all participants re-posting his charts, his mailbox is completely swamped with demand for answers with little supply to go around.

Go ahead and do whatever you like Sledge. Your efforts are appreciated. The individual once known as PivotProfiler needs to realize that when you post on a public forum, you make it public business!

I find it interesting that the individual known as KPCurrency on another forum which I believe is the same person as PivotProfiler has not deleted any charts from that forum. Maybe he was not able to?