[VSA] Volume Spread Analysis Part II

[jjthetrader]

	Quote:	Eiger
	I was seeing it more bullish, but I really don't know this market, so probably not correct. This is a critcal area, though. If it can't rally away from this area, it would be weak, in my judgement.

I would have to agree on the bullishness part. However, like Eiger, I am not in tune with cable. It seems to trend forever and thus being a reversal trader can be frustrating in this market (I know how much to like to short Sledge).
But the market never actually ends up acting the way we thought it 'should'. You never do know so you take the higher probablilty trade.

Keep us up to date Sledge with any trades you make and why.

Good trading everybody.

[Sledge]

	Quote:	jjthetrader
	I would have to agree on the bullishness part. However, like Eiger, I am not in tune with cable. It seems to trend forever and thus being a reversal trader can be frustrating in this market (I know how much you like to short Sledge). But the market never actually ends up acting the way we thought it 'should'. You never do know so you take the higher probablilty trade. Keep us up to date Sledge with any trades you make and why.

JJ and Eiger-
Ok, I've been known to be wrong- dead wrong. So if two people are seeing bullishness and I am not, would you tell me what you see to indicate the bullishness?


JJ- you marked a bar strength (that nasty ugly downbar closing down but on the high of the bar) Since then the market has rallied quite a bit (chopping all the way no less) With strength coming in, wouldn't we have seen maybe a temporary rise and then fall?

As far as Shorting: Well shorting is fun, so is going long. I really don't care which direction the trend is, as long as I'm "in" on the correct direction!

I most certainly will let you all in on any trades. As of this AM. I have no trades riding. I'm waiting for a set-up that I can get in where I want to be- some sign of directional "fluidity" right now the chop is not where I like to trade. Didn't I say that with my "system" it would test my patience- it is right now, patiently waiting for a sign to have a reason to trade.

Sledge

[jjthetrader]

	Quote:	Sledge
	JJ and Eiger- you marked a bar strength (that nasty ugly downbar closing down but on the high of the bar) Since then the market has rallied quite a bit (chopping all the way no less) With strength coming in, wouldn't we have seen maybe a temporary rise and then fall? Sledge

Well according to Eigers Wyckoff analysis you appear to be in an uptrend. So volume like that can stop a down move. You could retest the area. Watch for low volume. If you're not going to retest it then watch for a 'test in a rising market'.
More than likely a sharp move to shake people out before a big upmove will take place.
There's always the option of fading this is it fails.

[NAVEEVIa]

If anybody here want charts from previous VSA thread, i can upload them.
I had saved all charts from all contributors till page 144 of that thread
Just let me know
Naveen

[Eiger]

Sledge,
On a daily continuation chart there had been a down trend since December, or so. To me, this looked like it ended in a Selling Climax. It then broke the down trend by going sideways through February with successful tests and, in the process, built some cause to go higher. It had a spring (another sign of strength), and then some impulse movements up with volume generally expanding to the upside and receeding on reactions. In this process, it decisively broke the resistance from late January. All of this is bullish.

So far, on the daily, I don't see any buying climax or significant crowning over at the top. Those, of course would be signs of the bear (and, for a compatriot who also likes to go short, you know what these look like ). The one thing I worry about for longs is the last reaction (from your chart). It is a bit larger than i would want to see, basically wiping out all the gains made on the last rally. I don't think it kills the strength in the background, but it is what Wyckoff referred to as a "critical area, where it seems a feather can tip the balance in either direction." It's no surprise, then, that it can be seen as bearish as well as bullish.

The danger now is that Cable drops lower here. I think the danger point is the support line at B-A. It could spring this (penetrate below,but then quickly rally and close well above), and that would be very bullish. (I don't think VSA calls these springs; they may refer to them as tests or maybe shake outs.) It can also rally from here, and then as JJ says, look for a Test in a Rising Market. You had some demand come in on the hourly chart you had put up, so a rally is a good possiblity. What I would not want to see is a deep penetration of B-A and/or a close below that level. That would turn me bearish.

Hope this is helpful,

Eiger

[Sledge]

Eiger-
Helpful? Oh yeah it is man. You see I'm still looking for my niche in finding the right "zoom" on the chart/timeframe mix. I'm going to print your info and do some digging. As I said right now I'm out of all trades. These congestion areas are a particularly difficult aspect of VSA to learn for me. Maybe that is their point from the pro $ side. With my analysis, I really saw nothing that indicated that the sideways action was anything more than a market pause. I envisioned sideways action for a few days- when it broke free last night- I obviously misjudged the move. Luckily for me I have learned now to sit tight- wait for the market to come to me, instead of chasing it or in a worse term- "beat it"

But this is how we learn. I am most appreciative of both you and JJ's contributions on this. I need to take some time to just analyze the information you both posted and make it sink in!

Sledge

[jjthetrader]

	Quote:	Sledge
	Eiger- Helpful? Oh yeah it is man. You see I'm still looking for my niche in finding the right "zoom" on the chart/timeframe mix. I'm going to print your info and do some digging. As I said right now I'm out of all trades. These congestion areas are a particularly difficult aspect of VSA to learn for me. Maybe that is their point from the pro $ side. With my analysis, I really saw nothing that indicated that the sideways action was anything more than a market pause. I envisioned sideways action for a few days- when it broke free last night- I obviously misjudged the move. Luckily for me I have learned now to sit tight- wait for the market to come to me, instead of chasing it or in a worse term- "beat it" But this is how we learn. I am most appreciative of both you and JJ's contributions on this. I need to take some time to just analyze the information you both posted and make it sink in! Sledge

Sledge, Hank Pruden has a book that gives you a nice overview of Wyckoff the way Eiger spells it out. It's worth the money. There's even some FX examples. Maybe see if your library can get it. It's called the Three Skills of Top Trading.
There's a lot of psychology in there that you might appreciate also and Point and Figure Charting.
Put your mouse over Hank Pruden and you'll see it.

[Eiger]

Since the S&Ps are sloppy today, here's a question on trade entry I made from this morning.

On the ES 15-min chart, there was stopping volume at B and a test of the high volume at E. It looked like the big money was using the Consumer Confidence news at 10:00 AM to accumulate. This area was the rally high from two days ago (1443.75), and a logical place for support (and, an example of climactic action at higher time frame support).

This also showed pretty nicely on the 5-min chart. About 88,000 contracts traded on the 5-min at B, which is ultra high volume on this time frame. Look at the close. This has to be strength coming into the market. Next bar, C was a down bar on volume less than the previous two bars, indicating a lack of supply where only 5 minutes ago, it was ultra high.

This caused a rally, and then another reaction. Bar E is a down bar back into the the high volume area, and is another Test. Next bar is also down, and does not draw out supply. Bar F is a reversal bar. F goes well into the high volume area and draws no supply. The close was equal to the previous bar, and only 1/2 point lower than E. I like that look of clustered closes, and I went long at the close with a fill at 1344.50. I took it off just below resistance at 1348.50. You can see the entry and exit arrows.

My question: Does this correspond to good VSA trading? Was Bar F sufficent confirmation to make a trade? I know the trade was successful, but was it successful from a VSA standpoint?

Eiger

[Sledge]

JJ-
Thanks, I have been to his site and looked this book over. It appears very interesting. I like the spin on "Behavioral finance"

I'll look into the book. Thanks!
Sledge

[Eiger]

	Quote:	Sledge
	Eiger- I'm going to print your info and do some digging. Sledge

Send me your e-mail address via a private message and I will send you something you should find useful (you, too, JJ, if interested).