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[VSA] Volume Spread Analysis Part II

 

I would like to start a fresh VSA thread due to the increasing length of the original thread. Please use this as a continuation of the first thread located here. PP has also removed the charts from his original thread (EDIT: they have since been re-posted). However, those that have been following the VSA thread should have gained knowledge tremendously. Hopefully we can make this thread as successful as the first one.

 

Here we go. The brilliant game of psychology:

 

attachment.php?attachmentid=5200&stc=1&d=1202863409

5aa70e3ccaf35_Feb.82008ESChart1.thumb.jpg.4d4a501ff0feeed69cffef378842c728.jpg

Edited by mister ed
update chart info

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[VSA] Volume Spread Analysis Part II

PP has also removed the charts from his original thread.

 

James,

 

Thanks for starting this.

 

By your above statement, I assume you mean a restore from backup is not possible.

 

Regards,

Bert

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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.

5aa70e3b61cbe_lowvoltestmaybe.png.f2714a9f99c10169ae5701fa315c2dba.png

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[VSA] Volume Spread Analysis Part II

PP has also removed the charts from his original thread.

 

See attached charts. Here are a few of PP's charts, complete with my notations. I guess geniuses get temperamental sometimes.

5aa70e3b6ac70_PPVSAonTLpermalink1104.thumb.png.af5f2c58a970a3b53e35e0b4ec7fa880.png

5aa70e3b75427_PPVSAonTLpermalink1170.thumb.png.2ef903a51973954890097bd942d8b9ab.png

5aa70e3b82d94_PPVSAonTLpermalink1221p123.thumb.png.70061362f65cb2f1450e4cc7e14c953c.png

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Yet more charts of PP's. Pity that he deleted all his hard work. Why on earth would someone go to all that effort...oh never mind. Here are a few more of his best charts, with a few notations by moi.

5aa70e3b9ed24_PPVSATLpermalink1300p130.thumb.png.4756341464dbc7daa36544234645691b.png

5aa70e3ba5d87_PPVSATLpermalink1331p134.thumb.jpg.e11f3c8646ce8bd665de1e1fc4f90a74.jpg

5aa70e3baeb48_PPVSATLpermalink1409chart.thumb.png.48d5aaaae16f076197763f1793b5dbcb.png

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Hey Tasuki - your notations are a big value-add to the charts - Thanks very much!

 

You're most welcome, Monsieur Ed. I REALLY wish we had a standard for chart-posting on this forum, whereby the poster (the person who is doing the posting) should:

 

1) include in the chart the contract name and type of chart (time, tick, or volume), as well as the values for the X and Y axes. You'd be surprised how many people leave those out...makes it near impossible to reproduce the chart with your own software and indicators.

 

NOTE: the real value of chart-posting comes when the viewer can reproduce the poster's chart with their (the viewer's) own indicators, to compare how they would analyze the chart with their own system--then compare their analysis with what the poster is saying to see if the poster really has a good idea, or a valid spin on the chart in question.

 

2) vertical lines from the price to the volume. This is especially essential in VSA charts. It helps the viewer see which bar the poster was referring to when they say such and such bar represents no demand, low volume test, a squat, etc. etc. etc. The vertical line is just a courtesy to the viewer.

 

NOTE: from my perspective, it's not so valuable just to post charts willy-nilly, throwing out to the public just anything you come across. Traders Lab is an educational site in which we help each other, and to that end, it is most useful to present your charts in a way that makes your message as easily understandable as possible.

 

3) Salient points in the chart should be marked on the chart if possible, not merely in the text. Again, this helps the viewer's eye grasp the poster's message quickly and clearly.

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Hi PivotProfiler,

 

Thanks for the welcome. I appreciate your reply to my question concerning the positioning of the close within the “no demand” bar.

 

To become comfortable defining a “no demand”, I must have reasonably grasps its essence within the content of market behavior as displayed by the experts of this form of analysis. This has eluded me for the past month…when I think I have it, I find that I have not. Thus I have reread sections of the thread and books, also studied charts (real-time and after the session) numerous times.

 

Unfortunately, I was unable to view the last picture pertaining to the last section of your reply.

 

Again thanks,

 

Brun

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James,

 

Thanks for starting this.

 

By your above statement, I assume you mean a restore from backup is not possible.

 

Regards,

Bert

 

Still working on it Bert. We will have some downtime tonight for maintenance purposes and will try to restore that thread as well. Thanks

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Well, I gotta say that the way this thread here has started out it is going to completely eclipse the first one - Tasuki has added a whole new dimension to the charts with his lucid comments and notations - he has set a high standard for us in this here thread.

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Here is my mix of candlesticks and VSA, hope it's valid and I follow some of the basic rules correctly. Correct me if I am wrong though as I am still learning.

 

This first chart is the ES daily and I highlighted the spinning tops against support. If you go back to our first two hammers with strong volume you'll see price went up to test resistance. Volume was relatively strong on the move to resistance which validates the move IMO. Price was rejected and fell back to our new support level but on low volume, which would tell me there is a lack of interest. This is where I believe it gets important, the three spinning tops also have strong volume. If you look at the chart the volume is similiar to those of wider bodies, but these bodies are smaller which in the candlestick world would give you a warning that the move is slowing down. But with the stronger volume I feel like the market maker is controlling the prices and building a position, quickly buying up shares that newbies are selling in a panic.

 

attachment.php?attachmentid=5128&stc=1&d=1202629279

 

This next chart is basically zoomed in so you can see the volume and corresponding price moves a little more clear. You'll see I outlined the bigger WRB with low volume, then the smaller candle with much higher volume. This tells me the smart money was allowing price to fall so they could continue their accumulation that was started two weeks ago.

 

attachment.php?attachmentid=5129&stc=1&d=1202629279

 

This is a weekly chart of the ES. Traditionally following basic candlesticks and seeing this chart I would say there was a doji with a WRB, followed by a bearish engulfing candle thus my bias would be bearish. But in this case, we will see that the down volume candle had more volume. If we break down the time frame and look at the daily we saw that the accumulation was at the low, thus making me bullish. If anything, we could test 1400 again and have a nice tradeable 70pt range. I'll take that.

 

attachment.php?attachmentid=5131&stc=1&d=1202629631

 

This is a long term chart with a long term trend line. The initial test to the support was on light volume, then a small body under the trend line with high volume. I'm not really sure what this means, so maybe some experienced VSA guys can shed some light. But again, as price stablized around support volume has been very high, which tells me strength.

 

attachment.php?attachmentid=5132&stc=1&d=1202629631

 

Then for the last chart. I highlighted a few key areas to combine candles with VSA.

Green - candles became much smaller with tall wicks. I know this really doesn't matter to VSA but in candlestick analysis this would tell me that the market maker has complete control. Now if I went into VSA terms and combined the two I would come away believing that someone is accumulating a large position.

Yellow - Price hits resistance on strong volume and a small candle, actually the doji itself is on low volume which would signal no demand. The big money isn't pushing price any higher thus it falls the next day. From there price continued to fall but the general trend of volume was down. This declining volume and declining price tells me there isn't a very strong force behind the move. Then we hit our lows with a lot more volatility, and alot of accumulation. So I would go out on a limb here and say that the professional money started accumulating in july, and continued in January.

 

attachment.php?attachmentid=5130&stc=1&d=1202629631

 

So as of right now, I would be willing to buy calls up to 1400. My stop would be just below a 50% retracement of the major wick that led to new lows, so roughly 1275. The reason for this is I wouldn't be surprised to see the smart money push price a little lower to create a little more panic in order to buy. If the general public is scared they will sell, which creates a very good opportunity for smarter traders.

 

Please note though, I went at this with a bullish bias. So if something sticks out that I did wrong that would infact be bearish I would love to hear it. Sometimes our own bias can blind us from big opportunities. And as much as I want to say that I'm a good enough trader to not allow that to happen, it's simply not the case yet. Good trading.

esvsa1.thumb.jpg.d9b3d57fb6d86045166b5695e21ccc58.jpg

esvsa2.jpg.3758e699b6e53aebec1e05091c083e2a.jpg

esvsa5.thumb.jpg.f3482337098ee6467bb0af6bb7ffe30c.jpg

esvsa3.thumb.jpg.81973fb467ff2aec5e23a4e86b6ea70c.jpg

esvsa4.thumb.jpg.8beeef4ba11b4c33db286f5071fffee6.jpg

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Someone hasd stated that they had taken all of PP charts and saved them- not sure who it was or when it was posted, but I was going through the 1st VSA thread from the start and reviewing all of PP's charts and posts that went with them. Maybe someone still has all of these charts and posts saved off somewhere?

 

Whatever PP's reasoning- I am uncertain, but I am glad to have gotten to look and use his charts, that I was able to see and match up with his analysis. I only got to post #711 before they all went away. But if their is a chance others have saved charts and posts- maybe the knowledge can be re-created.

 

I found his posts as enlightening- if not moreso than reading Master the Markets- very straightforward, and timely with multiple detail. It would be a shame if all that work was lost forever!

 

Sledge

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I'll start to re-post what I have to assist in any way I can with the original post #'s from VSA Thread #1

**All of the Posts AND Charts are PP's Work and not my own!**

 

Post #5

That is simply not the case. The text may seem "outdated" in that there much talk of Market Makers, but this only goes to show how the principles have stood the test of time. How the markets are manipulated by Smart Money (the term Todd Krueger prefers to Market Makers) remains little changed since the days of Wyckoff.

 

I find it hard to believe that you think there are not Professionals with things on their screen, like where the stops are, that the retail trader does not have. The playing field in simply not that level.

 

I have attached a chart showing what is going on in the Euro. A market (retail Spot Forex) not even around at the time the book.

5.jpg.d2564c20ce125749381a756fb1d1d2ca.jpg

Edited by Sledge
Added Comments

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Post # 68

Gaps are filled.

 

Interesting early morning action in the Euro.

 

Check out the chart below.

 

First we see a dark WRB followed by a GAP in price. Note the first candle with a double arrow. Notice that the volume is ultra high and the bar closes lower than the previous bar and off of its low. VSA teaches that this is a bar that may have buying within it. Now the next bar is key. It turns out to be a WRB, but the fact that the bar is up means the prior bar MUST of had some buying contained within it.

 

Now we move to the white WRB itself. Note that this bar creates a zone or range where we get a change in the supply/demand dynamic. We also know that the market does not like wide spread up bars on ultra high volume because of the possibility of hidden selling. In this case, however, the volume actually fell from the previous bar and is not ultra high.

 

We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here.

 

Next candle, closes in the upper portion of its range and higher than its open. Volume again is extreme. Here we have Demand showing itself. In other words, Demand is swamping Supply on this bar. SOMETHING HAS CHANGED. Notice that the next bar closes in its middle, has an equal close and volume drops off.

 

The Last bar closes on its high on volume that is less than the previous two bars. Although it does not make a lower low, this is a 'test' bar. The Smart Money is testing for supply and finds none. Now price is poised to go up and fill that gap.

68.thumb.jpg.e94dc22c6584b30122589c81e2590baf.jpg

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Post #133

I just wanted to show something that might help.

 

Originally, I was going to post this pic in the WRB thread and make the following point.

 

Not all WRBs are created equal. While there may be many factors in what constitutes a significant WRB, the three main are:

 

* Size in relation to other WRBs

* Amount of volume

* If the WRB is the result of some news related event

 

NihabaAshi is the true WRB expert and may be able to enlighten us as to some of the more reasons that determine a WRB's significant.

 

As I know you are looking at VSA, don't let what I just said about WRBs confuse you. There are three factors that constitute significant bars in VSA as well:

 

* Size in relation to other wide spread bars

* Amount of volume

* If the wide spread bar is the result of some news related event

 

Now in the chart below we see numerous WRBs or wide to Ultra wide spread bars. However, they are all not equal.

 

Let's just focus on the very first one on the left hand side of the chart. We see an Ultra Wide Spread bar with Ultra High Volume that closes up from the previous bar. VSA teaches us that markets do not like Ultra Wide Spread or Wide Spread bars on high or Ultra high volume. Because they could hide selling (supply) within them. Although some times they are indeed strength. Which by the way, much time is spent on in the bootcamp. Because many people after hearing weakness (supply) comes in on up bars automatically assume all up bars are weak.

 

We know this bar had some selling (supply) once we see that the next bar is down. If all that volume was buying (demand) then the next bar could not be down.

 

What we often see next, if the market is strong, is either a No Supply or Test for supply bar. Here we see a test. This is a low volume test. Note that volume is less than the previous two bars. Note that the test makes a lower low than the previous bar and closes on its high. It hard for me to separate some things, so I must point out that this test bar is in body of the WRB. But from a pure VSA point, note that the test is within the range of the Ultra Wide Spread bar. SIMPLY, A LOW VOLUME SIGNAL WITHIN THE RANGE OF A PRVIOUSLY HIGH VOLUME BAR.

 

Many concepts in VSA are logical. Here we see some supply enter the market. The next thing we see is a test of supply. The Professional want to take prices up, but are making sure that the supply is out of the market. If there were sellers underneath, then there would be more volume. And if a large amount of supply had entered (more than the demand present) then price would go down on more volume.

 

The key(s) here are that the 'test' comes immediately after we see supply enter the market showing us market strength. Or, simply put, location and background information. An aggressive trader might enter once the test is "proven" on the next bar that closes higher than the close of the test. Shown here. The reason for the question mark is that not everyone would enter at this point. Some use multiple timeframes, some use price action patterns, and some even use indicators ( ).

 

To be sure, the market did indeed move up and a quick profit could have been made. In fact, one could still be long as of this pic and in profit using only one timeframe and that repeatable and reliable pattern.

 

Once you witness Ultra Wide or Wide Spread bars on High or Ultra High Volume, you want to then start looking for bars with low volume. This is where you find no supply, no demand, and some test bars. Sometimes there will be high volume tests or Upthrusts on high volume. An Upthrust is kind of like a high volume test but showing weakness rather than strength. That is, a high volume test will close on or near its high and an Upthrust closes on or near its low. Ideally a high volume test will make a lower low while the Upthrust will make a higher high.

 

There is a lot more here, but it is enough to say that every No Supply or No Selling Pressure sign in this pic is within the range of a significant Wide or Ultra Wide Spread bar. More precisely, within the body of a significant WRB.

133.thumb.jpg.df7d3ca7ae38bcea762733685afdb301.jpg

Edited by MrPaul

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Post #71

Nice Bullish White Hammer pattern.

 

Note that the white hammer line is inside the range of the Ultra Wide Spread Ultra High Volume candle.

 

When we take a look at the WRB, we see a down candle that has an ultra wide spread and closes on its low. There would appear to be heavy selling pressure in this bar. BUT THE NEXT BAR IS UP. If that bar was true selling, then the next bar would not be up.

 

In fact, if one looks at what price did after that bar it moved up. Clearly, the Professional demand created an upward drift in price. Simply, that WRB must of been a shift/change in the Supply/Demand dynamics of the market.

 

Now note the large dark Candle just prior to the shaded area. This candle closes on its low , closes lower than the previous bar and has volume less than the previous two bars. This is No Selling pressure. The close on the low fools the retail trader into seeing weakness. The lack of volume, however, is the real clue.

 

Price does move down a bit and create the bullish hammer pattern. Note that the hammer line itself is a VSA shakeout/test bar.

 

This is the "ideal" set-up. We see strength come in using our primary methods (VSA and WRB) and then we get a buy signal via our secondary method (Japanese candlestick patterns).

71.thumb.jpg.29b104b0bd9b47f2092b26799151c8af.jpg

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Post #106

What did they know, and when did they know it? OR the importance of Volume.

 

Here is a chart of some of today's price action in the Euro.

 

What is telling here is the actions of Professional Money PRIOR to the news release. We can see when they begin to position themselves and on what side through the use of VSA.

 

Almost an hour beforehand, we see an Ultra Wide Spread Bar with Ultra High Volume, that closes down from the previous bar and closes in the middle of its range. This bar represents a transfer of ownership. That is, the Professionals are buying from the retail traders. Why would they be buying prior to a usually volatile news release ? Seems like a risky thing to do. Could they already have an idea of what it will say?

 

Now VSA tells us that if this is the case, we would expect that if they are BUYING now, they will be SELLING into the release itself for profit taking. Especially If the news spurs the retail traders into entering the market on the long side. However, if the retail trader is believes the news to be bearish, they (Smart Money) would be BUYING more. That is, if the retail traders are getting short, who are they selling to? So we should see both Professional selling and buying. We don't expect then to get net short in other words.

 

Check out the large dark hammer as the news is released. There was some profit taking on that bar. But the bar has ultra High volume, closes on its low with the next bar up. Some buying must of taken place as well. More exactly, they took profits and then began buying as the retail traders (weak hands) rushed in on the short side. We always want to consider "who is on the other side" with VSA. Usually, its the Smart Money and that is not good. I should say, without VSA it's usually the Smart Money and that is not good.

 

Note that price did begin to fall for a few bars. But then we get a dark hammer line. The Long Shadow of the hammer line happens, not so coincidently, to trade into the region of the First candle mentioned where the transfer of ownership begun. The Smart Money is becoming aggressive on the demand side. They are locking in the weak holders (retail shorts) as they know price is going HIGER NOT LOWER. The down move and the dark hammer itself may have even pushed some weak longs out.

 

If you look at a chart beyond the time shown here, you will see the strong up move that ensues.

 

1. The Smart Money began getting long (long) prior to the News.

2. Some used the event to take a bit of profit.

3. Most got even more long (demand).

4. Once the weak holders where short, price found support in a such a way as to knock out weak longs and lock in weak shorts.

5. what can not be seen in this picture, is a large inverted white hammer that represents the last effort for the weak shorts to get out at break even if the bought on the news release itself.

 

When we use VSA we get a 3 dimensional picture: volume, range and price. Ignoring one of them (like volume or keeping volume constant) is like cutting off one leg of a tripod...............

106.thumb.jpg.f8762a3d667a453c582ebe4693361a87.jpg

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Post #107

 

If there has been a theme to my posts recently, it is summed up in the word: CONTEXT.

 

I am learning to use candlestick patterns as a secondary method. By that I mean, entry set-up signals.

 

VSA and WRB & Long Shadow analysis are the primary methods and are used to understand the contextual backdrop thru which a candlestick pattern trade can be taken.

 

Take a look at the chart below.

 

We see a WRB on Ultra High Volume. VSA tells us that markets do not like Wide Spread up bars on Ultra High Volume. Because there could be hidden selling in the bar.

 

Now check out the very next bar. This bar has almost as much volume as the WRB, in fact it has 3 ticks less. BUT the range is much more narrow and the bar closes in the middle of its range. This is a transfer of ownership bar. The Smart Money is dumping supply into the market. As retail traders rush in to get long, the Smart Money is all too happy to sell to them. Like I said, we need to always be aware of who is on the other side of the trade.

 

While this bar is up, on high volume it is not "up volume". Most volume indicators and volume analysis would assume it is positive. But we know better than that.

 

A few bars later, we see a narrow bar that close up from the previous bar and closes in the upper portion of its range, but on volume less than the previous two bars. This is No Demand. Professionals are not interested in higher prices at this time.

 

At this point we have context. Supply has entered the market. Note that price overall begins to move sideways.

 

There are some who would go short after the No Demand with the background selling that can be seen. This is a personal choice. For me, all that the context says is, "now is not the time to be going long". I need to see some candle pattern, preferably within the range of the WRB, to get me short. (if you look at a chart from today, you will see that price plummeted after the jobs report). But my point is this, the context, or story, at this time says more about NOT going long than simply get short.

 

A Tradeguider "sign of weakness" might appear on the transfer of ownership bar. It would therefore look like the top was called and thus possibly sold. This is the error that most indicator only traders who look at TG make.

107.thumb.jpg.3e9a02917fc92822f6e3856d94b09836.jpg

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Post #114

 

BEFORE & AFTER:

 

I have attached two charts. The first is the before and the second is the after.

 

Let's look at the before.

 

For me the key concept comes thru at least a basic understanding of WRBs. Of course, VSA doesn't look at the open, but I think much is missed if you don't. More over, I think that if VSA did, they would come to the same conclusion. And in fact, they DO come to the same conclusion partially when dealing with wide spread bars (more on this later).

 

The first bar with the double arrow is a wide spread bar that closes in the middle on ultra high volume. Supply enters the market on this bar. Not a place to go short. The reason: the reason is explained in the next highlighted bars.

 

The next bar we have is a Long Shadow and in VSA terms, it is Ultra Wide Spread bar on high volume, that closes lower than the previous bar, and closes in the upper portion of the range. DEMAND entered the market on this bar. Now, here is where I depart from VSA. We now have a Long Shadow that creates a support/resistance zone. We also see that this Long Shadow tells us that demand overcame supply on the lower portion of the bar. Not to mention, this bar is a Doji (close=open). VSA does not care that it is a doji, yet the conclusion that something is changing in the supply/demand dynamic is the same-Buyers came in on this bar.

 

Still not the bar to get into the market on. The next key bar is a WRB. WRBs also tell us of shifts or changes in supply and demand. Then we get a No Demand bar. Again not a bar to enter on. What we need to see is something happen within the RANGE of the WRB AND OR THE RANGE OF THE SHADOW OF THE LONG SHADOW BAR.

 

Ideally, the market will move back down and give us a No Supply or Test within these ranges. Then we should be looking to go long. And that concept is what Todd does not say much about. Clearly, he would not talk about within the context of the WRB because he does not look at the open, but he can talk about the overall range of the Ultra Wide Spread bar. In other words, even though he would not know it is a Long Shadow, he would recognize the bar as Ultra Wide Spread and thus should be used as a matrix to measure what comes.

 

The next chart is the AFTER.

 

We do indeed get the No Supply sign in the range of the WRB and the Long Shadow candle. Once we have the confirmation bar up, the next bar, we get long at the close of that bar/open of the next bar.

 

Note that there are two gaps and gaps are usually filled so we need to keep that in mind.

114_before.thumb.jpg.d160b21fdeca6dccad4c5398b0d877a8.jpg

 

114_after.thumb.jpg.07386f848760f209135076ab6518190f.jpg

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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.

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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..............

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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

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