Chart (1) - 5-Minute ES for Feb 3, 2009 -- AM A - UpThrust. Market opens at the high of yesterday afternoon (must know your background) on very high volume and closes down, well under yesterday afternoon highs - bearish. Next bar is down and market begins to fall. An aggressive trade is to short on the UT. B - Market falls, but volume recedes. On B and the bar before B, closes are in the middle indicating buying coming in. Note the lack of progress on the lows from the bar before B and B. Next bar is up. C - Market rallies and volume comes in on C, indicating buying. D - As price comes back to the low at B, a lack of supply emerges. E - Bottom Reversal, and bullish. Note a higher low (from the yesterday afternoon low) is put in. F - Market rallies to F where volume suddenly increases at the supply area from yesterday afternoon and today's open. G - As the market reacts from the supply, it does so on receding volume. G is a Hidden Test and a location for a long. H - Volume increases at the Globex high, close is in the middle, indicating likely supply. I - No Demand. J - Volume increases on this down bar after potential supply into a resistance area. This indicates supply coming into the market. K - No Demand. Good location for a short. Next bar is down. L - No Demand. The market is clearly struggling to stay above support (blue line). Another good location for a short. Next bar is down. M - Another No Demand as the market attempts to rally (lackluster) N - Volume swells and progress to the downside shortens.
Chart (2) Re: Pure VSA 1 - Price dips down below the support at N, then closes back above the low of N. Most important is the volume. Note how volume has substantially receeded. This is Testing for supply below N and finding none. Good location for an agressive short. 2 - A small Bottom Reversal sends the market up. Note that a higher low has been put in. 3 - A higher high, but volume falls off here, so we can expect a reaction. Next bar is down. 4 - No Supply. Note the higher lows (green line). 5 - This and the bar that follows is pushing through the supply formed between N and the Globex high - very bullish. 6 - Note the high volume on this bar and the next bar closing in the middle. Had this been butting up against resistance (like it did earlier this AM at H), it would indicate siupply entering the market. Althought there is supply in this volume (there has to be), the market has just pushed up above last night's highs. We now have a Sign of Strength, not a Sign of Weakness. 7 - No Demand, but there is no weakness in the background, only strength. 8 - A minor Shake Out into support. Note that the volume did not expand substantially. 9 - Another new high, though price is closing in the middle. Note the volume. It has not expanded here. Supply is not evident.
10 - The bar before 10 is on low, low volume (no supply). Bar 10 is a Hidden test closing on its highs and a location for a long. 11 - As we rally higher, bar 11 gives us a large increase in volume with a narrowing spread. More selling is occuring on this bar. Note the close of the following bar - caution.
Re: Chart 3 Pure VSA Feb 4th Background is always the first thing we look at in VSA. The 60-minute chart is often a good time frame for the market phases and overall background. Coming into today, there was converging resistence from a congestion area (red line) several days ago and the Supply Line (blue line) of the uptrend channel. Both converged in the 850 area. About an hour before the open, it looked like price might not even get to the 850 area as there was a reaction off yesterday's high. A - An upThrust at yesterday's highs, next bar was down and a reaction occurred. Price held it's gains, however, and began to rally 10 minutes after the open. B - Wide spread up bar on strong volume, close on its highs. Price pushed up and through the resistance area of yesterday's highs. C - No Supply back to resistance-now-support. The 3-minute chart had a No Demand in this area.
D - very high volume enters as the market nears the 850 resistance area. Spread is wide, and the close is off the highs near the middle - caution. E - More high volume and a close in the middle - supply. F - Again we see an increase in volume, close in the middle. Note the lack of progress made from E to F. Next bar is down - selling. G - No Demand H - No Demand I - No Demand J - No Demand K - Hidden UpThrust M - 2-Bar UpThrust/Top Reversal Plenty of opportunity to get short. N - Selling Climax The supply that came in at resistance had similar principles as occured on Feb 3rd. Careful study of these two charts will serve you well in the future to know what to look for as price approaches resistance, and then what to look for once it starts falling.
Re: Chart 4 - [VSA] Volume Spread Analysis Part II Just posting a chart that relates to the chart in the pure VSA thread. This is what I call an "position" trade. The bias was for an upside trade (long) because the VWAP and the PVP were just about equal. The "hard" open for the Euro is 0200 EST. What we are looking for is a way to get long with the expectation that price will move back up to the VWAP. See the market statistics thread for reasons why. A: Climatic Action stopping volume. Wide Spread down bar on Ultra High Volume closing near the middle of its range, with the next bar up. At the time, this is the highest volume bar that can be seen. As we have had the "hard" open, it is expected for volume to pick up, but this is level speaks to something more. This is a transfer of ownership type of bar. The BBs are net buyers into herd selling. B: Down bar with volume less than the previous two bars within the range of a high volume bar. This is no supply. The range is not as narrow as we would want to see and the bar makes a higher high. We would rather see the bar trade lower than the previous bar. C: Wide Spread down bar on Ultra High Volume with the next bar up. This bar is being support at a HUP line-yesterday's low. Volume is higher than our climatic action bar so we must pay attention to it. If there was selling in all that volume than the next bar should not be down. Also note that the range should be larger with respect to the amount of volume. D: 2 Bar reversal pattern. We have strength in the background and now we see a two bar pattern of strength. This is occurring in the place we want to see it from a MS point of view-at SD-3. This is a good place to go long with a price target all the way up at the VWAP.
Re: Chart 5 - [VSA] Volume Spread Analysis Part II Live right edge (AKA put yourself out there to be labeled a fool LOL): Here is a chart of the Euro 3 min. Before we get to the right edge we have to look at how we got there. This is looking left to trade right. Ignore the black lines (SDs) as they are for Sunday/Monday trading. A: Ultra High Volume up bar closing off its high with the next bar down. When weakness appears, it appears on up bars. As oft repeated, markets do not like this type of bar as it could contain hidden selling. Well if all the volume on this bar was buying, then the next bar could not be down. It is. This sets the stage and the weakness here does not just disappear. B: If A was strength, we would see it tested immediately and we would also note an old top to the left. There are not old tops to the left, so pushing thru supply is not likely what was going on in bar A. B, however, is a down bar on volume less than the previous two bars. No supply. This bar should be ignored there is weakness right in front of it. C: First "tricky" bar. We see an up bar on volume less than the previous two bars on a narrow range. It is No demand. However, it is not completed as the next bar is up and not down. Looking closer at the bar, note that it makes a lower low then the previous bar and not a higher high. Ideally, the bar
would make a higher high and not a lower low than the previous bar. Simply, we would like it to be a mis-named buying (Dunnigan) bar. Momentum takes prices higher. Momentum is a powerful thing. D: D is a narrow range down bar on volume less than the previous two closing in the middle of its range. This is the Test we were looking for to confirm that A was strength. Or is it? Well, first off it is not in the correct place. A good test would be in the range of the Ultra High Volume bar. This is not. Two bars later we complete a 2 bar reversal where the second bar is a wide spread bar that closes lower than the low of the test bar at D. This is no result from a test. This is likely, CW's WRB dark engulfing candle that he talks about. For our purposes the concept is the same. A wide range bar closing on its lows that closes lower than the low of the test bar. In fact it closes lower than the lows of the last three bars. TG would have a SOW over this bar I am sure. E: The best place to take a short (but not the only place). We see a narrow range (NR7) bar closing up and on its high with volume less than the previous two bars. Note that this bar does not trade higher than the close of the bar at A. This close at A is Gavin's trigger number signal. Also note that E is within the range of A, unlike the test that could of fooled us. Bar E is completed on the next bar as the next bar is down an makes a lower low bring many into the market. F: This is a two bar reversal. Seb Man likes to see wider spreads on this pattern but it is none the less a Two bar reversal. "Coincidently", the first bar trades up to, but not thru, the trigger number level. The second bar closes lower than the previous three bars, does not make a higher high , and closes just off its lows. We actually like to see two bar reversals "proven" with either a test or no demand soon after. G: The very next bar is an up bar on a narrow range (NR7) on volume less than the previous two bars. Simply, it is no demand and proves the two bar reversal pattern. If you only short on up bars then this was what you were waiting for. Enter on a breach of this bars low. H: This is just another No Demand bar as price moves down. Again, we note that this bar appears within the range of bar A. Thus, in the area where there was once high volume we are seeing little activity (low volume). If you were not yet short, this is yet another entry place. Of course the day/week is ending soon and most traders are already hitting happy hour. Okay, that's our background. When the market opens up we would expect to see a possible (Gap) down move. Forgive me, but I must add this. Market Stats tells us that the VWAPd is above the PVPd so what we would want to see from that perspective is a move down to SD1 and then a move up at least to SD2. Or the market could move down to the VWAPd and then bounce up from there. Either would be consistent with what VSA is telling us at this time. We do have to be careful with what happens with the TARP over the weekend. It could cause the dollar to strengthen which would be consistent with our VSA view, or it could be received negatively for the dollar. So we are looking for early weakness (prices down).
Re: Chart 6 - [VSA] Volume Spread Analysis Part II Having issues with ensign so here is a 5 min chart from a different software. The focus of this chart is the same as the prior chart (Euro 3 min.). The set-up here is very nice and worth looking at further. A: Narrow range (NR7) bar closing down on volume less than the previous two bars closing near its highs. This is a test. Great example of a test as it closes lower and makes lower low. A test is a sign of strength, but we must see what happens after. In other words, the test is a "cause" and we now must look to see "effect". B: 2 Bar reversal pattern. Sign of weakness after our test. This is a very nice example as the second bar makes a lower low, closes near its lows and does not make a higher high. We would actually like to see the close of the first bar closer to the high for a text book example. In fact, the next 2 bar is more text book although it fails to produce. Note that the second bar closes lower than the close of the test bar. C: Wide Spread up bar closing near its lows on high volume with weakness in the back ground: this is an Up Thrust. Again, we get a higher high and not a lower low as the spread widens from the
previous bar. Prices are rapidly marked up only to fall and close near the lows. Possible entry for the super aggressive type. D: Note where we are- we have drifted up into the area of the 2 Bar Reversal. With these reversal patterns, we like to see them tested/ or find no demand within the area of said pattern. We see a narrow range (NR4) up bar on volume less than the previous two bars. This particular no demand bar makes a higher high but not a lower low which is ideal. We can enter short on a break of the low of this bar. E: The market moves down and then drifts back up, where we see another narrow range (NR4) up bar on volume less than the previous two bars. No Demand. Again, note that this appears within the range of the 2 bar reversal pattern. The stage is set. We have weakness in the background. Starting off with No results from a test (we have the cause but no effect). A 2 bar reversal pattern shows further weakness. Just for good measure, we see an Up Thrust in the correct place showing us even more weakness. For entry we like to see a No demand- we get two. Just to finish off the thought on the 2 bar reversal. Take a look at the second one . It is immediately followed by a third 2 bar reversal, this one a bullish pattern. This countermands the previous pattern. Now take a look at the bar labeled No Supply. This bar is within the range of the third (bullish) reversal pattern. As we move forward , we do not see a No Demand type bar within the area of the second pattern. Thus, although the second pattern is the most ideal in look, it is the one that fails. In fact, notice that we see tests that fall within the range of this pattern. Since this was a bearish pattern, we would not want to see test, but rather no demand. Test would prove to be bullish and thus nullify the bearish reversal pattern.
Re: Pure VSA Hi folks, I have selected the Swiss futures (6sm9) for 7 May 2009, the trading session from 17h00 to 18h00 ( 11 EST to 12 EST). Imagine, for the sake of game play, that we have a couple of margin calls on our account, and a close buddy throws you a lifeline by giving you, say 500$, to trade for an hour and u keep all the profits. From this background, I have thrown a challenge at VSA to help me analyse the setups occurring on the basis of spread and volume action on this 1 min chart. These are the patterns I see in this 1 hour time period. 1. Uptrust. Consider weakness in background and that volume is decreasing in next bars, showing that professional selling took place on this up bar. 2. Uptrust. This is another uptrust in a weak market. 3. No Demand. Another high probability pattern for shorting. 4. Uptrust. Volume increase but effort is not matching volume, as price close in middle, spelling more downside. 5. No Demand. This is a shades of gray, but it has volume has than previous 2 bars and it is good candidate for a short. This bar;s high fails at the low of 1, converting that level from support to resistance. 6. Bottom Reversal. Volume dries up compared to previous bar and close is higher too. 7. No Demand. As we are in a rising market, its easier to spot the lack of supply. 8. Stopping volume. A down bar closing in the middle on average volume. 9. No Demand. Back to back no demand bars but the lack of follow through on following bars. 10. Top reversal. This is a two bar top reversal on decreasing volume.
11. Stopping volume. Volume is less than average, but its still match the stopping volume pattern. 12. No Demand. This bar setup match a two bar top reversal. However, volume less than 2 previous bars qualifies this bar as a decent No demand bar. 13. No Demand. This is our bread and butter setup for shorting failed tops. 14. Test. This is testing the high volume of 11. I wanted to go a step further, and from this setup, select the highest probability 5 setups that I could have taken. The highest probability is informed by the fact that our stop would be 3 pip below the low or high of the previous bar, and it would be pattern that a professional VSA trader would not skipped. Bars 3, 6, 7, 10 and 12 come across as the highest probability setups on this chart. Please let me know which 5 setups on this bar would be your highest probability setups. If possible, post your own 1 min chart from your datafeed, so that I can compare which datafeed has more reliable volume for the Swiss future. I am using ensign with Transact on this chart.
You are able to identify lots of the VSA indications. Nice job. The next step is to put these together a little more coherently and frame the market. Here are some ideas to consider: Background - 60-min chart: Note the area circled in black. It is at the top of the trend (though we know it is at the top only in hindsight). Compare this to the area circled in green. They look very similar, don't they? There are very key differences, however. Take a close look at the bars in the green circle area. Whenever price dipped lower, it immediately rebounded. In most cases, volume came in on these bars (green arrows). Professional money was buying anytime the market dipped lower. We know this from the volume. Lower prices were being rejected. The background was very bullish at this point.
Now, look at the black circle area. Although it looks similar to the casual eye, it is very different. Note that wide spread bars are no longer dipping lower, closing higher. They stay on the lows and volume comes in. This is supply present. I noted this weakness in the ES a couple of days ago. Larger interests were unloading into the buying until the buying was finally exhausted. Also on the 60-minute, the circled area is a distribution area and represents a "cause" of selling in that area, the "effect" of which is likely to be lower prices to some degreee. That degree can be estimated via S/R levels and a point & figure chart. We are seeing that cause unfold now. So, the overall background is down. But there will, of course, be rallies intraday, but short-lived "bear traps" designed to attract buyers. Taking long positions with this background in mind are best kept to limited objectives. 15-min chart: You identified some stopping volume at 1 on your chart. The very next bar was a Test, and the bar after that was unable to fall lower, so the odds were good for a rally. 5-minute chart: The stopping volume on the 15-minute chart was climactic on the 5-min at 1 with a Spring following at 2. So, we are looking at a rally of some degree. Price drifted up in a small uptrend with higher bottoms, and then tested (T) before going up. At Q, the market rallies above the climactic bar at 1, an indication demand is in control. In the green circle area note that each time the market dips lower, it closes back on its highs -- this is the same behavior we saw in the green circle area on the 60-minute chart. The market is always repeating itself, it is just that the intensities always vary. Note also that price is holding it's gains on top of the last congestion area (resistence then turns to support now). So, we are bullish. Price rallies through the green circle congestion at R and then hits some supply at A. We know it is supply because of the volume and rather poor close. The very next bar (#3) is a Test, falling lower than the low at A and closing on it's highs on light volume. This test respects the new support level and indicates that the supply seen on A isn't significant. I like these indications for entry. Next bar is up. Bars 4 & 5 are up on good spread, but the high volume and poor close show supply. This is the highest volume since the rally began and indicates a portential climax at this point and danger to the bulls. Bar 6 is No Demand further adding to the weakness now emerging. But the bar following 6 dips lower and has a good close and the next bar, 7, is a Test, so we can anticipate higher prices, which follow. At S, we again see heavy volume and a poor close, then a large spread down bar with sustained volume closing on its lows. This is a 2-Bar UT and completes the weakness we began to see about a half hour earlier. Although aggressive, I like short entries on UTs and 2-Bar UTs. Keeping in mind that the overall background is still bearish (60-min chart), longs should not overstay their positions and we can anticipate more follow-through to the downside tomorrow. Hope this is helpful,
Re: Pure VSA It has been a while – a nice, long long summer of good trading and other nice, relaxed fun…. A – Look at that volume – very heavy, but the close is off the lows. B – Hidden Test on volume less than the previous two bars. C – Up bar braking though resistance on wide spread and increased volume – no doubt – it’s bullish! D – After holding gains nicely atop of old resistance now support, a 2-Bar Bottom Reversal at Demand Line rallies the market upward. E&F – Although E moves up on heavy volume, F closes below the middle – possible selling and possible weakness. Next bar is up on light volume – possible No Demand and still uncertain. G – Next bars are up on good spread and good volume. Demand is still in control. H – After a sideways move, price returns to the Demand Line on a light volume down bar – No Supply. Next bar is up. I – Test
J – wide spread up bar on good volume, closing on its highs – bullish. K – Heavy volume, close in the middle, potential supply. L – Hidden Test M – Test and rally into the close. Have to love VSA! Hope this is helpful, Eiger
Re: Pure VSA I have been out of action on VSA metholody and would like to pick up the pieces. here is my interpretation of the VSA setups on the Emini S&p. of course newer traders are advised to read the volume spread action on the 5minute against the background of the 15,60 charts, which gives more clues on resistance and support levels 1. We are in uptrend, marked by closes in the upper range. the prior bar has high volume, but the current bar has decreased volume and price close on the low. this is bearish and a setup for a short, subject to following bars closing below the low of this bar. 2. An up bar on reduced or average volume suggests no active buying interest, and a sign of no demand. the close below the low of this bar on the following bar is proof of further weakness.
3. Siminlarly, a no demand bar. 4. a Contraction of bars, seen in the spread narrowing, always foretells something coming. a close on the low shows further weakness. 5. Huge volume flowed in on previous bar. If there is active selling, we expect follow thru. However, this bar shows reduce volume and a close in the middle. Bears, altough showing desperation, lack power to pull down prices. A sign to get out of shorts. 6. After a contraction of bars for longer period, this bar fails to take out the low of the previous bar 2 bars ago. Volume interested also dries up. This is a test of the lows at no 5. 7. Great volume is needed to push above the highs at the left side. Cautious, conservative traders would wait for a test to get a safe entry, which comes 2 bars after this. Trendline traders would be happy to jump the soup train here, as clearly a downward trendline is broken. 8. The uptrend is in doubled, with a close on the low on volume higher than average. 9. a successful to see if there are sellers lurking somewhere. The bears fail to come and price can resume its upward trek. 10. Weakness comes in on up bars. this is a no demand bar. 11. a little contraction is always helpful to learn which way price is going. here a close on the low open floodgates to the south. 12. a Shakeout,a bullish sign of a trend reversal or uptrend resuming.
