ok then...lets pretend elvis left his quarter pounder and had to enter the buidling one more time...then hes off to work down the chip shop........im in the poo if either of the brown lines occur on the chart....loads of work to do ...so my last analysis ...this one im also reverse engineering ...from the swing low ive marked ..to the pullback low..i would consider this to be about 30%-40% retracement of the overall up move..this would be typical for this style top...ok lets rock....as you can see by my usual shoddy typing style...i had a numpty type it up for me while we analyised it tonight as a team...
1
First of all – As well as forward engineering I decided to also show reverse engineering as the market has to come from SOMEWHERE to begin. This allows us to forward engineer with a greater degree of accuracy with a fuller picture.this is point ONE , the first question is, do we consider the hard left edge (of this chart) to actually be the bottom from where the following price action derived from? The answer here is NO due to lack of volume and comparing the closing action at the highs the price action is not that significant to make us believe that it is the base of the market. If we also view the first two legs within the orange lines these both have the feel that we have just come from consolidation as these are typical of breakout legs. So therefore I would conclude that we have come from a mid point consolidation and prior to this we have had approximately the same depth of movement as we had after this consolidation. See initial set of YELLOW LINES on chart.
2
Having already mentioned the previous two breakout legs we can also note that the duration was short, we can say YES that buyers were driving the market higher, but we can also note that the demand was NOT that sustainable. We can also note that the third leg is diminishing in velocity and the 4th leg more so, showing even weaker demand. The fact that none of the legs were at all sustainable leads to the conclusion that the upside of the market was derived more from the shorters within the pullbacks (in between black lines) having to close positions. Consequently we know that there is not that much fresh buying interest in the market at this stage, but also the market gives the feel that as we are churning positions and pushing higher for a reason,maybe a major number.
3
Note the first horizontal white line
WE previously stated that demand is weak, we can also now note that at the two points marked with the white dashes, aggressive counter action coming into the market, however note that the attached volume is still low and in no way represents a major exchange of positions involving professionals. There fore we have to view this action as a fake double top, temporary in its nature and its objective to attract shorts into the market and to shake out any existing weak long positions. Note also the typical divergence shown weakening volume on the test
4
The break out candles from the dbl top. we can see that in fact volume is actually picking up and increasing on the second candle from the top, this signifies that any selling is being met with aggressive buying by the pros, as a successful breakout should be accompanied with low volume due to a lack of demand. This is denoted by the PINK diagonal line. Note the pink dash is the test of the supply which we can see is severely reduced
5
Following the aggressive buying and drying of supply we have an up leg which moves on low volume. To some this is weakness, in fact this is a sign of no supply in the market at that time. Note that it makes the same resistance level as before, creating the illusion of a triple top. a deliberate ploy of course.
6
this is interesting for the following reason, the volume attached is relatively large, this is solely because
weak hands have considered this to be a triple top in nature. Any selling is met with aggressive buying, hence the high volume. The second candle in the sequence, lower volume, signifying no more selling in the market and again this is met by buying , the prices also could, nt hold the lows. Note that if we handt made resistance ,the triple,we would have expected a supply test with aprox half this volume.
7
Having already concluded that the dbl top and triple top were fake due to the fact that we had not considered that there to have been significant exchanging, noted by lack of volume at the highs and approaching the highs, the expectation at this point ,having now shaken out weak longs and secured weak short hands into the market, is a breakout to the upside. However, the extent of the breakout was quite exceptional in nature. Now we have already pointed out the demand was weak in the market in the prior upmoves ,and the proceeding shake and fake has produced energy to the upside, but no where near to this extent, we have therefore to conclude that another factor was involved in creating these exceptional levels of demand and price movement. This could be one of a number of factors. The most obvious being key levels and news. I would conclude that as we are aware that the price has not ventured into these levels before that we must have hit a significant dollar value for example, (100 dollars per share etc). This would account for the nature of the price movement and attached volume. Leading into this initial break pros would mark the price through the previous resistance to start the sequence. My estimated key level is noted by the light blue line. Volume attached to this exceptional breakout candle is still high, signifying there is aggressive pro selling within this candle. Of course knowing that the whole of the previous move was built on weak and weakening demand it would be foolish not to at least cover their long positions at this point.
8
Considering the exceptional nature of the previous day, it should be amazing that
weak hands still bought the market and this considering that we had gapped higher. This is possibly contrived to bring in final demand using another key number. The two candles and the level of price movement will leave
weak hands exceptionally vulnerable in this market. As we can see within the two black lines the pros sold this isolated weak final demand. We are now in a situation where the
weak hands are grouped,vulnerable an imbalance which the pros can take full advantage of. However due to the duration of this top I do not consider that the pros haven't had time enough to accumulate sufficient short positions to bring the market down to its original base. This is unlike a heads and shoulders, which allows at least three points of accumulation within a reasonable price range, allowing for purchase at a good average price. Therefore I consider this to be an opportunity to short the market but the whole nature of this move is to shake weak long hands from the market and to fake in weak short hands, ultimately allowing re accumulation at lower prices.
9
From the top we had a velocity shake out,easy to achieve due to little if any new demand left and very vulnerable weak hand longs held at extremes.The second white line signifies another illusion created, a dbl bottom. We can see that the volume attached is not high. This signifies pros covering short positions, these positions being given to weak shorts. The double bottom would sometimes yield new weak longs, which would then be exposed within the market due to the fact that new accumulation has yet to take place. This is noted by the light green V. However this did not occur so we were unable to create demand to create supply so we could re accumulate. So this process is to still be achieved.there is still great opportunity for pros to shake longs,create fake dbs,stop hunt at key levels and also to create false breaks of support.
10
Note the orange line, the break out candle and the following candle. We can see that the volume here has increased, this shows more aggression within the market by the pros. However as noted by the chart we have significant key levels below and these are ideal situations to stop out any weak longs and to fake any shorts into the market. is this enough volume at this point to represent concluded accumaltion..nope.as the supply also doesnt look that strong in this market,we have to encourage it down,this can be done by creating more fake dbs,see the white line at key support.we can then bring in some longs,on the wrong side off the market,aggressive sell into them,not much would be needed and force them out creating supply.
11
We can see by my price action (Marked YELLOW) that I then consider an inverse heads and shoulder to lead to the opportunity for new accumulation.noted are also approximate volume levels which i would consider to show strong enough buying to move and sustain the market at this point. we have now concluded the shake and fake cycle of the market and good value has been obtained for new longs. The following up leg would then commence with lower volume showing a lack of supply within the market. We would then be able to use weak shorts closing to help the market proceed towards previous highs.
12
The final point, I would be looking for reactions within the red zone,particularly aggressive selling .also looking for signs of new demand coming into the market out of any pullbacks,above and beyond what i would feel were weak shorts having to close. If the market proceeds through this band then the likelihood of taking out the the high is very probable.
.....to conclude ,believe it or not this is just a snapshot of what is there.i would like to add that every bar tells a story and withing every bar also a story and so on.there is no such thing as noise,just a lack of understanding.this is also no such thing as an uninteresting bar,again lack of comprehension.volume and price are what they are ,they work symbiotic-ally,cant have one without the other.volume can lead price ,this can be self fulling,lot of people looking for them spikes...but mainly price creates volume.but of course understanding volume,who,why and how,the battles,the exchanges,the manipulations ..all attached to the price movement...can help you to see the probably scenarios before they occur....then the price and volume merely confirm your already probable conclusions.when people tell you to wait for a lower high etc ..at a top...their basically asking for more confirmation...and what their saying is t personally they need more information..more confirmation because they dont understand the market well enough to take it earlier.the more you comprehend others actions .. even before they do.the sooner you can take a signal and maximise your profit ..with no greater risk.risk is inverse to market knowledge.there is no substitute for knowledge...and no substitute for hard work and endeavour which will take you there.the market cannot be formalised,know yourself .know others and do your best to remain humble even when success comes.for if you dont an almighty fall is just around the corner.
cheers mark j
