[VSA] Volume Spread Analysis Part II

[winnie 10]

Dear Sir,

Could you point out where you see this ?

"

At A, there was good stopping volume over three bars.Note how the lows refused to go lower - a shortening of the thrusts on increased volume ("bag holding") "

thanks

[Sledge 13]

Winnie-

My ONLY hesitation to take that trade is that was that the second test bar was of HIGHER volume than the previous test. If that second Test bar was LOWER in volume, I think you would have had a good ride upward.

 

*Remember that if a market is testing you want to see LOWER AND LOWER test bars. This shows they are removing the supply and testing said supply. With a HIGH volume test like that- it WILL have to Re-test that area again before it can make a northward move.*

 

Be VERY Hesitant of taking a trade on a test-bar with higher volume than the last test bar. I personally don't see that as "Stopping volume" To me stopping volume would come more likely at the FIRST test. Stopping volume shows the brakes on the downward move are being applied by the pro's, and being applied HARD, you then expect to see after the stopping volume: re-testing. And as I said- you want to see testing with lower volume than:

A. The Stopping Volume bar

B. A first test

 

It may be tested 2 or 3 or 4 times. Before the supply has been removed.

Aaron

[winnie 10]

Dear Sledge,

Thank for your advice. Would you tell me which one is the test bar ? Would you point it out to make it more clear ?

Anyway your advice is very helpful.

Thanks

[Sledge 13]

Dear Sledge,

Thank for your advice. Would you tell me which one is the test bar ? Would you point it out to make it more clear ?

Anyway your advice is very helpful.

Thanks

 

Winnie-

Ok Here we be:

The Bar PRIOR to Bar "0" Shows indecision and the stopping Volume

Bar 0: You see a test of supply (Note its volume to compare vs. bar 5)

Bar 1: You see a positive reaction to the test of supply of Bar 0

Bar 5: This is the bar I was discussing- Notice that it is indeed a test but the Volume is MUCH higher than Bar 0.

 

As I do not trade this mkt, I have no idea how it turned out- looking at this from a blind perspective and applying just the VSA method to the chart:

 

For me personally, I would not have taken a long position on this particular bar (Bar 5) because its volume was so high compared to the last test of the same general area. But my trading style may differ tremendously vs. your own.

Aaron

[winnie 10]

Thing very clear ! Thanks

[Eiger 10]

Good VSA indications and trading this Am on the ES 5-minute chart:

 

1 - No Demand after weakness off the open

2 - Stopping Volume over two bars

3 - Test

4 - Top Reversal

5 - No Demand

6 - No Demand after lower high

7 - Stopping volume

8 - Spring

 

Eiger

[winnie 10]

thanks for sharing things with us.It is clear ! However I would like to know where I could learn the terms like : stop volume, Top Reversal ...... I do not understand what it mean and how to find it out.

 

Thanks for your time, it is really very helpful.

[winnie 10]

Dear sir ,

In addition , would you use 5 minute chart for entry and stop ? I feel there is a lot of noise in 5 minutes chart before, but after looking at your chart and your explains, it seems to be very clear .

 

Thanks

[Eiger 10]

I would like to know where I could learn the terms like : stop volume, Top Reversal ......

 

These are VSA terms that you can learn from Tom Williams's book: The Undeclared Secrets that Drive the Stock Market. I am told that the book Master the Markets put out by Trade Guider is very similar, though i have never read that. There are also some educational materials available from TradeGuider that are helpful, particualrly their "Chart Reading Boot Camp" CD.

 

The 5-minute chart can sometimes be noisey. Noisey days are usually related to money flow. On low volume days when there isn't much activity, it can get sloppy. When there is decent activity like today, the 5-minute chart is pretty orderly and readable.

[Eiger 10]

And here is the rest of the day:

 

9 - Test

10 - No Demand

11 - Top Revesral

12 - Stopping volume

13 - No Demand

14 - Stopping volume & Spring

15 - Test

16 - Hidden Test

17 - Test followed by a Bottom Reversal

18 - Another Test followed by another Bottom Reversal.

 

Very logical, very straightforward. So many good opportunities hard not to do well today. This is what I like about VSA.

 

Eiger

[Eiger 10]

Update on SPX:

 

On the attached pdf file, you can see on the 5-point Figure Chart of the SPX (updated through today) that we have completed a first phase reaction to the 1375 level -- this is the first small triangle or flag. Often, the market will have a little bounce at the first phase level or begin consolidating and eventually either rally to higher levels or set up to go lower when there is an other phase to the count, as is the case here. (use the view/rotate/counter clockwise buttons to view the FC).

 

The lower count reaches down to 1325, which may materialize. We can also rally a little higher and set up for a potentially large move down, but that is getting ahead of ourselves.

 

The market broke through the Demand Line last week on increasing volume and wider spread, indicating supply is dominate (red arrow on the daily SPX bar chart). A run down to 1325 would take us past the 1/2-way point and into the resistance area at that level. Many times, the FC will give a "stepping stone count" at a first phase level that reaches the second phase of the original count. This is typically a good timing indicator for an intermediate move. The key, of course, will be the character of the current rally.

 

Eiger

SPX FC 5 pt May 28 08.pdf

[jjthetrader 10]

Update on SPX:

 

On the attached pdf file, you can see on the 5-point Figure Chart of the SPX (updated through today) that we have completed a first phase reaction to the 1375 level -- this is the first small triangle or flag. Often, the market will have a little bounce at the first phase level or begin consolidating and eventually either rally to higher levels or set up to go lower when there is an other phase to the count, as is the case here. (use the view/rotate/counter clockwise buttons to view the FC).

 

Eiger

 

Eiger, I love your analysis. Great job. The Point & Figure is a great addition. I use it as well. Mister Ed will be happy to see this posting to.

 

It's amazing that on a relatively small range day that you point out 'it's hard not to do well'. That's so true. Usually sideways days kill traders but your analysis shows that it doesn't have to be that way with VSA.

 

I like the 5 min analysis. I find that timeframe provides really nice indications on the ES.

 

Keep up the good work.

[Eiger 10]

I think that if you study VSA, annotate your charts every night, practice trade it for a while, and keep an eye on what different timeframes are doing, you can do quite well with VSA. Not every day has so many indications as today, but pretty much every day has at least a few very good trades.

 

Tom Williams talks about P&F in his book. It is a part of VSA, but they couldn't get the software to work correctly, so it hasn't been highlighted before. It is a specific way to create the chart and apparaently the software is tough to code. They say that P&F will be in the next version of TradeGuider and that those issues will be resolved. I'll think about buying the software then In any event, the P&F analysis is useful in many respects. It is great for support and resistance, and also tells you where many moves are likely to end. Also, they are good for tracking the trend.

 

I love the 5-min chart. It is my main trading chart. I also look at the 3 and 10-minute charts and will take trades off of these, as well. As you know, I have no use for time frames below the 3-minute chart - for me, they can be quite detrimental. During the day, i will also keep an eye on the 30-minute chart. I think a lot about the day can be read off the 30-minute chart. Some very good traders call it the "Key of the Day," for good reason. It often gives the best indications on what will happen next.

 

Eiger

[Guest forsearch]

 

Tom Williams talks about P&F in his book. It is a part of VSA, but they couldn't get the software to work correctly, so it hasn't been highlighted before. It is a specific way to create the chart and apparaently the software is tough to code. They say that P&F will be in the next version of TradeGuider and that those issues will be resolved. I'll think about buying the software then In any event, the P&F analysis is useful in many respects. It is great for support and resistance, and also tells you where many moves are likely to end. Also, they are good for tracking the trend.

 

 

Eiger,

 

You might want to look at Investor R/T. Seems that they have a number of tools and charts relating to Point and Figure. Some links to check out....

 

http://www.linnsoft.com/tour/pointandfigurechart.htm

 

http://www.linnsoft.com/tour/techind/renko.htm

 

http://www.linnsoft.com/pnf/

 

http://www.linnsoft.com/videos/pnfbeta/

 

http://www.linnsoft.com/videos/pnf/

 

Chad, from Investor R/T should be able to answer specific questions about it.

 

Hope this helps.

 

-fs

[Eiger 10]

This is the weekly continuation chart of the ES. Last week gave us a 2-bar UpThrust or Top Reversal (red arrow). Combine this with the FC and daily SPX bar chart from the earlier post and we can now begin to think about a further move down into the 1325 area, and perhaps lower depending on what additional cause may build on the FC. VSA works in all time frames and the higher time frames are always important to keep in mind. This has become quite negative. We can think about No Demand on the weekly for entering shorts.

 

Eiger

Edited May 29, 2008 by Eiger

[Eiger 10]

Eiger,

 

You might want to look at Investor R/T. Seems that they have a number of tools and charts relating to Point and Figure. Some links to check out....

 

 

Thanks, I'll take a look.

 

By this point, most of my charting is automated. The only exception is the FC. I still like to do these by hand for the major markets. I do use BullsEye Broker for most FC work in stocks and other commodities that I trade, but I still like to keep the hand charts of the SPX, DJIA, etc. It helps to keep me in tune with the market, and takes only a few minutes to do.

 

I will take a look, though -- thanks again.

 

Eiger

[winnie 10]

Where I could find that book "The Undeclared Secrets that Drive the Stock Market" ?

 

Thanks

[tawe trader 10]

Where I could find that book "The Undeclared Secrets that Drive the Stock Market" ?

 

Winnie, you can use google to find it, like most things on the web.

 

If you can't find it, have a look at:- http://www.tradetowin.com/default/intro.php

 

Tradeguider are also giving away Master the Mkts as a free e-book:-

http://www.tradeguider.com/book/

 

Regards

Tawe

[tawe trader 10]

WHAT'S HAPPENING WITH OIL ????

 

Over the last couple of days the price of oil has been a regular item on non-financial British TV, radio, newspapers and websites. Could this mean a top of approx $133 per barrel is in ? I don't know (I usually only trade the FTSE and ES) but out interest I've had a look at the daily crude oil chart and noticed some classic VSA bars have been formed recently.

 

Looking at the July contract for Nymex Light Crude Oil:-

 

1. May 21st - wide spread upbar closing on the highs on very high volume, potential weakness ?

2. May 22nd - upthrust, new high but close down on the lows with ultra high volume.

3. May 23rd - no demand (up close and vol lower than previous two days) and inside day.

 

There was no trading on Monday but as you can see the price of oil has fallen away, quite quickly from the highs.

 

Regards

Tawe

[Seb Manby 11]

Well today at the end of the session, we had a shake out, So Monday I expect to open higher, but the daily chart looks weak still, and I think we will see the bottom of the trend channel(Daily chart). there was no shake out of the market that I can see, so I think the overall picture is still weak, however Monday might show some strength, but I cannot say if it will last. Some employment news this week, but 4th July and the Boston tea party and all that will put a short week into peoples minds.

 

Please not that my views can change, and are not set in concrete as market conditions can change.

 

Regards Sebastian

[mister ed 10]

Seb - your watch is a bit fast - next week is normal trading sessions in the US.

Edited May 30, 2008 by mister ed

[Seb Manby 11]

Thanks, I must have clicked one month forward on Bloomberg calendar, and I was quite tired too, so maybe that is why I did not pick up on it.

 

Regards Sebastian

[Seb Manby 11]

Here are 2 more charts showing trend channels using Reuters data. clearly shows the market trying to break up through a lower trend channel, which looks as though it will bounce lower at the moment.

 

Regards Sebastian

[jjthetrader 10]

Seb, thanks for sharing your charts. When you look for rejection of your trend channel, are you assuming there is weakness in the market or are you going by a single-bar analysis of no-demand on the underside of a trendline and thus only looking for a minor retracement?

We just haven't seen any real weakness enter the market so I'm wondering what your take on it is.

thanks.

[jjthetrader 10]

This post continues regarding Sebs comments. The reason I ask, Seb, is because on a longer term channel we have rejection of price going lower, below the channel (as seen in my attachemnt).

If we don't see any blatant weakness in the market (background) and we just rejected price below the longer-term channel, is this not what the folks at tradeguider would indicate as an ideal long position? If not, why?

Thanks.