[icecool]

Today morning for all practical purpose, we had a gap down opening. Do not bother about the first candle which is right there on the opening bell. None of us could see that freak trade around 364 on the open. We could see only around 355 around the opening bell. This gap down opening itself charged up the bulls. They made and attempt to close this gap, which was successful. Not only that, look at the volume when yesterday’s high was breached to the upside! There was an opportunity to make some quick bucks, which was promptly made. Then came that wide range candle with extremely high volume and it closed in the middle. It came after a substantial upmove. It was clear that it was a buying climax. I have marked this candle with arrow (third arrow marked candle from the left). Further confirmation of this buying climax came when price could not take out the high of this wide range candle. The moment low of this buying climax candle was breached I got out of my longs and created a short simultaneously. Initial target was day’s low and if it also breached, the next target was the red upper range trend line from the range generated by key candle in the daily chart referred in my earlier posts. Why? Because any pullback after breakout will test the area of breakout. Resistance becoming support. Frankly, I was expecting strong support at the day’s low. Ultimately, that held out to be the support, albeit at slightly lower level, enough to clear all sell stops below the day’s low. I closed my short position when the price came close to day’s low made on the early morning. I felt bit tired and hence moved away from my screen. To be honest thereafter I did not look at the market until they were closed for the day.



I shall update daily chart and weekly chart tomorrow, if time permits.

[jonbig04]

Have you tried looking at larger time frame charts, find your S/R levels there and then watching to see how price reacts to them during a smaller daily chart? You should be able to see some very obvious and fascinating S/R action if you do.

[icecool]

Now the updated daily chart. See chart first.



All that action that has taken place throughout the day has resulted in an upthrust. High volume, wide range with large wick candle and closing on the lows. By any means, it is a picture of bear.

Now the context. As such I see a selling climax followed by two tests. Second test candle has been named by me as “key candle”. That candle appears to be having a lot of gravitational force. It does not allow the price to moveup. Initially, it resulted in a range. I have drawn two lines denoting the top and bottom of this range. Yesterday, i.e. last candle on this daily chart, was an attempt to break out of this range to the upside. Actually that attempt began on 04/12/2008 afternoon itself. But was there enough strength? On 04/12/2008 itself, I was smelling the discordant note struck by the volume. In that post, I was analyzing the possibilities how a novice trader could be lured to go long and they how he could be sucked in. But the possibility thought by me did not materialize. Instead even a better approach was taken. Price was opened on the low in the morning, then it moved up implying continuation of rally that began on the afternoon of 04/12/2008 and thereafter it was slammed back. But the moot question is whether the upthrust candle is in perfect place? Has it occurred after a rally? Was there any weakness in the background?

In this context it is important to analyse where the trading range (that has been produced by the key candle) has occurred. It has occurred almost on the spot of second test of the selling climax. So a tricky question. How to interpret this trading range? As a sign of strength, or as a sign of weakness? Is it a distribution before going down or is it an accumulation before going up? Now I look at the volume on each and every candle in this trading range. Usually, trading range should be having low volume. But this is not the case here. Again why this is occurring? Selling climax is a sign of strength, first test is a sign of strength. Naturally second test should have resulted in further more elimination of sellers and if a trading range that has resulted after second test should have less sellers and more buyers. If the professionals are eager to accumulate, then they will do so without much fanfare. That would have resulted in lower volume on downdays and higher volume on updays. Not vice versa. Not almost equal volume on all days in trading range. Less volume in trading range when compared to the volume of candles that led the last downleg. If these things are not there, then I become suspicious of the trading range. What does the trading range as a whole say? What was the behaviour when the price moved out of the trading range? Trading range as a whole says, activity has not died down yet. When the price moved out of the trading range, it met with selling. Both these imply that sellers have not yet finished their stock. If that is the point, will the professional side make an attempt to accumulate? Will they make an attempt to mark it up? So in nutshell I am expecting some more tests of selling power and I am interested to see the results of those tests.

If I am not sure about the movement, the best thing I can do is to sit on the sideline and watch. If I am in doubt, I can consult the higher timeframe chart and see what is happening there. That brings me to the weekly chart, which I shall analyse tomorrow.

Bump:

Originally Posted by jonbig04 »

Have you tried looking at larger time frame charts, find your S/R levels there and then watching to see how price reacts to them during a smaller daily chart? You should be able to see some very obvious and fascinating S/R action if you do.

Jonbig,

Thanks for the help. Kindly see first post of this thread. That contains weekly and monthly charts. Weekly chart starts from 2006 and monthly chart begins from 1998. My comments about them are also there. Do you find anything in them that I am missing out?

[icecool]

Now the weekly chart. See chart first



I see a well defined Lower High – Lower Low pattern. Price is below the down sloping supply line. Volume on last downleg (i.e. from the first arrow marked candle to the candle having lowest low in the chart) was higher than its prior downleg. I donot see any selling climax in the weekly chart. Both these imply selling is not yet over. However, since last several weeks price has been moving in a range. I have marked the upper and lower boundary of this trading range. Last weekly candle has closed in the middle and volume was higher than previous week. Last candle on the weekly chart is a Doji implying indecision. Unless one side wins, it is difficult to take position. Best is to sit out and watch. There are two overhead resistances. One from the low of the last pivot point, which incidentally is the upper boundary of the trading range and another is from the downsloping trend line (supply line). Overcoming twin challenges is not very easy. On the whole, bears seem to have an upperhand.

[Bearbull]

Look into the Wyckoff forum espcially in Dbphoenix's blog on how to correctly use trendlines, support/resistance zones to gain entry and establish exit points in a logical manner, also study the pdf file there on Wyckoff analysis of 1930-31 market, as I have shown in the thread "Trading The Wyckoff Way", all the principles explained in that pdf document are as relevant now on any time frame as they were nearly 100yrs back.

[BlowFish]

IC good thread. I haven't said too much as you seem to have a pretty good grasp of 'market dynamics' (for want of a better term). Seems to me that the biggest issue you face is utilising this knowledge to enter and exit trades? I might be totally wrong here, I often am I get the impression that you are stalking a trade here, without being sure what that trade is? This is not about not knowing which way price will break but having a plan in place whatever it might do. I wonder where your 'focus' is. Are you looking to catch a swing on the daily?

[icecool]

Originally Posted by Bearbull »

Look into the Wyckoff forum espcially in Dbphoenix's blog on how to correctly use trendlines, support/resistance zones to gain entry and establish exit points in a logical manner, also study the pdf file there on Wyckoff analysis of 1930-31 market, as I have shown in the thread "Trading The Wyckoff Way", all the principles explained in that pdf document are as relevant now on any time frame as they were nearly 100yrs back.

Bearbull,

Thanks for the guidence. I shall definitely look into them. I think you are referring to DB's blog in this forum. If he has any other blog, can you give me the link?
Thanks in advance

Bump:

Originally Posted by BlowFish »

IC good thread. I haven't said too much as you seem to have a pretty good grasp of 'market dynamics' (for want of a better term). Seems to me that the biggest issue you face is utilising this knowledge to enter and exit trades? I might be totally wrong here, I often am I get the impression that you are stalking a trade here, without being sure what that trade is? This is not about not knowing which way price will break but having a plan in place whatever it might do. I wonder where your 'focus' is. Are you looking to catch a swing on the daily?

Blowfish,

You are spot on. My perpetual problem seems to be hesitation in entries and jumping out of the trade at the slightest hint of doubt. This has resulted in missing good moves (in case of hesitated entries) and early exit (incase where position has been built up). Can you help me out?

I am not eager to put a trade in this moment. Because both in weekly and daily charts price is wandering in a tight range. I would like to see a direction in place and then movein. As it is my focus is on the direction of breakout (either up or down). Logic on the basis of available evidence tells me that next possible direction is downside breakout. I am intending to put on the trade either on the breakout or on the retracement back to the base after breakout. As it is there is one attempt to move to the upside (in daily chart) out of the trading range. Often I have seen on the move in opposite direction, a similar extended move on the downside and then pull back in to the range and thereafter breakout (which again can be in any direction). That sort of movement sucks in perfectly. I will have to watchout volume carefully at the time of and subsequent to breakout.


Yes. I am trying to catch a swing on the daily chart. Thanks for the guidence. I think I got the clue in your post. I should be focussing on what I should do incase price breaks out in either direction. In otherwords, I must have two plans in place, one for the upside and one for the downside. Have I understood hint given by you correctly?

[Bearbull]

There is enough material in the wyckoff forum (numerous threads and posts) and in the blog to enable you to arrive at some form of understanding of price action via price volume relationships.