22nd February 2013, 02:53 PM IP
We ended up in the value area that we highlighted as a possibility. We're not trying to forecast the market, but we are trying to avoid placing ourselves in trades that have a greater risk of failing. That's why we use the Volume Profile to structure the market and develop our "IF/Then" statements.
Also, as an Admin note, I've moved this thread to the Discretionary Trading Styles forum so those that share this style of trading can comment and contribute. I have allot to learn in regards to the markets and of particular interest to me is the Market/Volume Profile style of organizing the markets information.
What actually Happened
So, what happened last session? We opened right at 6332 and attempted to retrace to the prior session close at 6351, but failed. That failure just 10 minutes after the cash open was the sell signal, highlighted on the 150 tick chart to show not the value of hindsight, but what to look for in terms of selling pressure. Its always a difficult decision for me whether or not to trade during the IB phase. There are times when it makes sense to let the market bracket out the Initial Balance and times when the best opportunity will be to take the trade during the open. This just comes with experience and until we feel confident to take the trade we can stand aside, its free.
After that signal the market continued to drop at a rate so fast that by the time the IB period was finished, the market had made over half its move. The market only paused at 6322, pulled back after the break and resumed the sell off. Same thing at 6300. These are bearish moves, going right through LVNs without hardly a pause, price firmly rejected on the retest to resume its search for value.
Price attempted to bracket briefly at 6293 before finally pushing lower, flushing out longs into the value area at 6260 and bracketing up higher in choppy action typical of markets in balance.
So what now?
The market is in balance, or has established a value area at 6270 or so.
The market can move higher
a.) Looking at the ES at the time of writing the market could gap up to the 6300 area. I would expect that for the martket to continue up it would need to test the VPOC at 6275 before moving higher. If that happens and we see buyer come in we will then attempt full size longs.
We could Bracket some more
The market could open and test the value area and simply wait for new information. If this is the case then we will look for sells of the VAH at 6300 or even as high as 6322. We need to be aware that short covering could drive prices father than we can anticipate. If the market tests lower to 6260 and finds few sellers we could look for scalps size long. This needs to be a drift down on low volume, if we see volume in the selling then we need to be aware that we could be looking for lower prices.
The market can move lower
I would expect a test higher before we moved lower. Markets tend to bracket before continuing into another range extension. IF we tested 6293 or 6300 and failed, then failed to hold 6260then we should prepare for lower prices and look for PBs at those lower levels. 6124 is really the next accepted value area on the composite. If the Asian markets were still selling off then its another story. Korea for example has rallied 1% after an gap down on the open to retracing all of that move to back at 50% again....CL had been hit hard by selling and has recovered some of the losses.
Anyway, i can honestly say that i cannot recall seeing a market reverse so quickly since i have been using Market Profile for structuring the markets so i am eagerly looking forward to this session.
Today's Key Levels from top to bottom:
LVNs
6342.5
6322
6300 (key number)
6278.5
6254.5
6242
HVNs
6354
6332
6293.5
6270
6260
6213
Cheers,
