Very interesting chart here. First, I trade using a duel timeframe set up. The chart on the left is a 30 min and the chart on the right is a 10. Trades are made on the 10 min. Here I have replaced the 30 with another 10 min chart rather than showing a single 10 chart.
When one understands price and volume, the message of the markets becomes so much more clear.
On the left side. Here we see price as the market trades on Sunday into Monday. The black arrows point to Squat bars (volume churn). The small green arrows underneath some bars are No Supply bars. The red arrow points to a No Demand bar. Okay, let's tell a story:
The market is trading below the narrow
Value Area (t). As price trades lower it is meet with Demand (buying) at certain points. What is happening, is that there is Accumulation going on. The Professional Money is slowly, and quietly soaking up the supply in the market. This leads prices to rise up a bit to the middle of the
Value Area (t). However, when price gets there we see No Demand. At that time, the Pros are still not interested in higher prices. (as we are only looking at the 10 min, we can not see that there have been NO signs of either supply or demand on the 30. Hence there is not the background strength that seems to be on the 10).
Notice that price falls back down after the No demand bar. Price falls back under the
Value Area(t), which is actually a cluster pivot zone in this example. Now note that price does not fall as low as it had just recently been. At the low, we get a No Supply bar. There are no sellers underneath this price. The Smart Money has soaked up the supply at these levels. With no supply in the market, price starts to head upwards.
Note that the range of the bars starts to widen and volume picks up as price makes an attempt to get above the cluster zone. Price gets above it. Now we see our first red dot. This is a squat (volume churn) bar. Some of the Professional operators are selling (taking profits) at this level. But what is more likely, is that some retail traders that bought on Friday are trying to sell back at break even today. Check out the time, we are now into the open of the London session, so more players of all sizes are in the market.
The bar that can barely be seen on the left, is the first bar on the right hand chart. So price does fall but finds support at the cluster zone. Resistance becomes support. The first red dot shows that there was more supply (selling) entering the market in this bar. Many people would see this up bar on higher volume as bullish. But it is not. If it were bullish, then the next bar would not be down. So this new supply cause price to fall. Price falls all the way to under the cluster zone. THIS IS THE FIRST KEY BAR: price falls but we see a No Supply bar. Note that this bar does not go as low as price traded previously. If those previous bars did indeed represent Professional Money soaking up supply, then price should not return to those levels. All the selling at those levels should be done.
Price heads right back over the Pivot Area. Now we see a couple more signs of supply entering the market. However, Price responds be moving sideways more so than down. Again, we are seeing Accumulation by the Smart Money. Stealthily, they are buying into any selling by the retail traders. The two green x's are there because there are actually signs of buying (green dots ) on these bars but they are slightly obscured by the cluster zone. So we can see some of the Professional demand at these levels.
At this point on the 30, we get our fist signal of Professional activity in the form of buying.
THE BAR WITH THE GREEN ARROW IS THE SECOND KEY. This is a 'test'. The Pros are testing for supply underneath the market. Again note that the low is at the same level as the previous No Supply bar and not as low as price traded in the earlier hours (left side). This bar trades lower, closes on or near its highs and has volume less than the previous two bars. The low volume tells us that they did not find any supply(sellers) there. Now prices are poised to go up. On the 30, 10 minutes later, we get a Shake-out. The Pros take prices down, before closing near the high in an attempt to bring in late shorts and take out early longs.
The dark green line shows the first bar after we get the Shake-out on the higher timeframe. Note that there was some supply entering on the previous bar. However, this bar is narrow and the volume has dried up-less than the previous two and less than the moving average. Coupled with what we know about the 30 min chart, we now have background strength on both timeframes. We enter on the open of the next bar.