[VSA] Volume Spread Analysis Part II

[VolumeJedi 10]

Issue #1: Next Tuesday 2/3/09 @ 0130 EST Tradeguider is having a webinar with live right edge trading. Start time is 0130 EST and end time is approximately 1130 EST Tuesday. It looks like this will be a two day event, which means the same times on Wednesday 2/4/09 as well.

 

Unfortunately, it is TG so there will be an air of a "sales pitch" but the VSA learned can be applied to any chart. Hopefully, some of you forex traders, and some of you forex doubters (no volume) will show up. I will be there even as I struggle with the use of VSA.

 

Which brings me to the second. I have attached a chart from earlier in the week that was taken for my benefit. Yes I know its after the fact, kiss my A** if you have a problem with that !!

 

The use of candles is not in honor of Todd Krueger, but rather because Jperl uses them. The volume is similar to what one now sees on most TG charts, yet not all that different from what was recommended here. Blue for increasing volume, Red for decreasing volume, and Fuchsia for volume less than the previous two bars.

 

To the chart.

 

There have been some things written about seeing terms like VWAP and SDs in the VSA thread. Well, Tom himself has said the next most important thing after volume is support and resistance. How one finds support and resistance is not really defined, except for the use of channels/ trend lines. Trend clusters are not disclosed (which is one reason TG lies when they say there are not a black box-if they don't disclose everything that's black box).

 

Well, I have found that HUPs (Hold Up Prices) are extremely good for horizontal S&R areas. In fact, it goes deeper than that. With the use of HUPs, one is able to use one chart timeframe rather than multiple timeframes. Okay, apparently I am still too upset to post. So here's the chart, make of it what you will.

[VolumeJedi 10]

Issue #1: Next Tuesday 2/3/09 @ 0130 EST Tradeguider is having a webinar with live right edge trading. Start time is 0130 EST and end time is approximately 1130 EST Tuesday. It looks like this will be a two day event, which means the same times on Wednesday 2/4/09 as well....

 

Turns out this is a paid event. My bad. I hate TG more and more each day LOL.

[Tasuki 10]

Turns out this is a paid event. My bad. I hate TG more and more each day LOL.

 

No prob, VJ. A+ for effort at least.

So, what were you upset about, this hijacking thing? I never saw the posts that Soultrader deleted so I don't know the dirt. Just glad we're back on track.

 

And speaking of back on track, dontcha think it's time we checked out some monthly charts? Heck, we've got the whole weekend (OK, it's not like I have a life or anything).

 

I'll start off with a monthly chart of the $SPX. Comments typed on chart.

 

I should have added that price tested the lows of 2002 two months ago with what looks like a potential shakeout (that would be November's candle). Then we got a test on volume lower than the previous 2 bars (3, actually) which looked bullish. Then we got January's "No Buying Pressure" (if I'm reading it right), which throws into doubt the highly tentative bullishness of that test candle.

So, I guess the jury's still out, but the bullish case sure don't look too damn convincing, at least not to me.

 

No doubt I'm missing obvious stuff (I do that). so any comments/corrections/additions welcome.

 

Tasuki

Edited January 31, 2009 by Tasuki
more thoughts added

[Tasuki 10]

Here's another one, crude oil.

Astonishing chart.

Can you say, "demand destruction?"

comments on chart.

[tawe trader 10]

Brilliant, tawe. So, what sort of confirmation would you like to see to make MSFT a longterm buy (we are at multiyear lows)? A test, right?

 

I think for trading the long side with Microsoft there are perhaps a couple of things to look for.

 

1. Individual bars showing a confirmed VSA test / no supply, or

2. The volume (over a range of bars) of a possible down-leg back into the previous area of ultra high volume ...... a multi-day test, so to speak.

3. If this retracement is on lower volume and the stock turns back up, then maybe a confirmed 'test in a rising mkt' could be an entry point.

 

I think it's a case of watching MSFT on a daily basis and seeing how things unfold.

 

If there is a successful re-test of the ultra high volume multi-year low, then a good old fashioned 1-2-3 bottom (breakout above point #2 ..... say 18.3) would also be a possible entry.

Edited February 1, 2009 by tawe trader
...

[Tasuki 10]

a multi-day test, so to speak.

.

 

Tawe, Please pretty please, when you see one of these multi-day tests, could you post it for my benefit (and others too, I suspect)--this is a pattern that sounds like it ought to be valuable to recognize, but I don't recall it ever being mentioned before on this or the earlier VSA thread.

 

Thanks! Taz

Edited February 2, 2009 by Tasuki
speling :)

[tawe trader 10]

Taz,

 

What I mean by a multi-day test is nothing really new and ground breaking. It's just that if we are looking for a possible long trade in MSFT then maybe the next time prices return to the lows, down into the ultra high volume area, then over a range of bars (instead of the typical VSA one/two bar test) we need to see relatively lower volume.

 

I have attached a possible future scenerio for MSFT.

 

After knowing about double bottoms and triple bottom for years, it wasn't until I learnt about VSA that I understood why they happened ie a double-bottom is formed after a successful re-test of the lows but if this fails because there is still supply in the mkt, the mkt returns back to the lows again. If this is successful then we see a triple bottom.

 

Obviously for double and triple bottoms to be successful there must have been professional accumulation by the big players as prices declined.

[tawe trader 10]

Microsoft update - daily chart

 

Well I never planned to do a regular MSFT update but seeing as it's a mkt bellweather stock and there is some interest in it, on this thread, I'll carry on, unless someone else would like to chip in.

 

MSFT didn't drop down to the 16.75 level but it did go as low the 17'ish area, which was the low of the ultra high volume wide spread down-bar. On the return to this 17'ish area the relative volume was a lot less than 6 days earlier.

 

We have now had 2 up days on higher volume than the previous 2 down days, which can be seen as possibly bullish. Also it's broken and closed above the point #2, so we have our 1-2-3 bottom in place and it has also closed right on the descending upper channel line.

 

It is looking fairly bullish but it now needs to try and hold this level without giving too much back and any retracement needs to be on low volume if we are to see any sort of reasonable bull run.

 

Any thoughts anyone ?

 

BTW, I had tried to post this about 3 hrs ago but there was attachment problems on the TLab website, which thankfully are fixed now

[Eiger 10]

This looks like an uphill climb to me. Butting up against a longer term (from Oct) Supply Line and a fair amount of supply to negotiate in the Nov - Feb trading range. It has made a Spring, but the volume was excessive - again, supply, and springs in a downtrend like this are not high odds trades. The last two days have been constructive with increasing volume to the upside, as you mentioned. Also, the spreads are wider than last week, another plus.

 

The ideal bullish senario would be a rally on good volume and spreads well above the 21 area, with a reaction on low volume, narrow spreads and testing the 21 area. A look at the weekly chart shows that 21 area to be a tough area to negotiate, though.

[wunderlich 10]

Have a look at http://www.finviz.com/ --> TopInsiderTrading

 

You will see that William Gates III sold shares from MFST for ca. 100,000,000 value in the last couple of days. -- no VSA, I know, but perhaps interessting to see

 

"MSFT GATES WILLIAM H III Jan 28 Sale 54,083,400

MSFT GATES WILLIAM H III Jan 29 Sale 35,585,200

MSFT GATES WILLIAM H III Jan 30 Sale 17,325,500"

[tawe trader 10]

This looks like an uphill climb to me.

 

Eiger, thanks for your multiple timeframe analysis. I tend to agree that it also looks a tall order for the bulls.

 

You will see that William Gates III sold shares from MFST

 

Cheers wunderlich for this info ........ fancy Bill Gates selling some shares near to a multi-year low !!!

 

 

I have updated the daily MSFT chart with my current point of view and again any and all comments are very welcome.

[VolumeJedi 10]

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.

[Turning Point 10]

Hi. Does anyone has any feed back on the latest VSA Real Time version 3 Tradeguider program?

[VolumeJedi 10]

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).

[Eiger 10]

Just excellent, VJ. .

[speres 10]

No prob, VJ. A+ for effort at least.

So, what were you upset about, this hijacking thing? I never saw the posts that Soultrader deleted so I don't know the dirt. Just glad we're back on track.

 

And speaking of back on track, dontcha think it's time we checked out some monthly charts? Heck, we've got the whole weekend (OK, it's not like I have a life or anything).

 

I'll start off with a monthly chart of the $SPX. Comments typed on chart.

 

I should have added that price tested the lows of 2002 two months ago with what looks like a potential shakeout (that would be November's candle). Then we got a test on volume lower than the previous 2 bars (3, actually) which looked bullish. Then we got January's "No Buying Pressure" (if I'm reading it right), which throws into doubt the highly tentative bullishness of that test candle.

So, I guess the jury's still out, but the bullish case sure don't look too damn convincing, at least not to me.

 

No doubt I'm missing obvious stuff (I do that). so any comments/corrections/additions welcome.

 

Tasuki

 

 

Great chart. What jumps out to me is the 'degree of trend'......

 

No real bounce off that support with the high volume, which is what you would expect, if demand came to town... The volume could then be profit taking.... the big boys making quite a killing... An increase in vol would also be expected with it being a supp area with a few buyers coming in... and so the fun and games continue...

 

How many times have you seen high volume on wide spread down bars only for price to carry on south?? heaps for me...

[tawe trader 10]

Microsoft update - daily chart

 

It's been a couple of days since I lasted posted a chart, as you know, MSFT and the Nasdaq have been acting pretty bullishly.

 

MSFT is coming up to an area ($21 - highlighted in pink on the chart) that Eiger mentioned that may prove a tough nut to crack.

 

The stock nearly got as high as the $20 mark last Friday but found some resistance from a previous high. Looking at yesterday we have an interesting bar. Does the mkt have a breather before rallying on up, or are we going to pullback to the lows ???

 

I have made some notes on the chart.

 

Tawe

[Dutchy 10]

Hi Guys

 

Great post

Would anyone care to post the latest NT or ProRealTime code, or return the page where it can be found ?

 

Cheers, Dutchy

[tawe trader 10]

......NT or ProRealTime code

 

Dutchy, I'm not sure by what you mean by NT and ProrealTime code for what ?

 

Regards

Tawe

[sleepy v2 10]

Any comment on the following (Losing) trade would be appreciated:

 

I was looking for a Short position following No demand bar in down trend, with weakness in background.

 

1 End of Rising Market

2 UpThrust

3 UpThrust

4 Shakeout

5 UpThrust

6 No demand

 

Australian stock ORG - trending down (on 30min TimeFrame) ...

Entered short position on bar following No Demand bar (#5)... @13.19 (yellow highlight)

Stop placed above Upthrust (#4).... @13.45 (yellow highlight)

Taken out 2 bars later.

 

Was this a bad trade, bad trade management or just bad luck?

 

sleepy

Edited February 11, 2009 by sleepy v2

[elovemer 10]

... no demand....

...no demand...

...no demand...

[Eiger 10]

Any comment on the following (Losing) trade would be appreciated:

 

I was looking for a Short position following No demand bar in down trend, with weakness in background.

 

1 End of Rising Market

2 UpThrust

3 UpThrust

4 Shakeout

5 UpThrust

6 No demand

 

Australian stock ORG - trending down (on 30min TimeFrame) ...

Entered short position on bar following No Demand bar (#5)... @13.19 (yellow highlight)

Stop placed above Upthrust (#4).... @13.45 (yellow highlight)

Taken out 2 bars later.

 

Was this a bad trade, bad trade management or just bad luck?

 

sleepy

 

Not necessarilly a bad trade, just poor timing. The longer a trend is in effect, the higher the odds it will turn. At 4 you had demand come in. It didn't result in much of a rally, but it is the first time in the down trend that buying exerted itself. That is a signal to begin getting cautious and start thinking about an exit.

 

Not certian the bar following 5 was No Demand. It is hard to see that section of the chart and volume is active in that area. You might want to repost a clearer chart.

 

A better trade location would have been in the No Demand bars between 2 and 3 on your chart. Why is this a better location? Because you have clear weakness in the background at 1 and 2. Then volume increases to the downside following 2 and it looks like it might have just broken the low between 1 and 2. Lots of weakness there, which is then followed by a very weak rally. Note the narrow spreads and low, low volume. Either the narrow, No Demand bar where the first white diamond appears or two bars later as the market turns down would be very good entries.

 

Repost a clearer chart so we can make sure you are seeing the No Demand properly.

 

Hope this helps

 

Eiger

[Dutchy 10]

Dutchy, I'm not sure by what you mean by NT and ProrealTime code for what ?

 

Regards

Tawe

 

I am trying to program the VSA for ProRealTime, but if its already done, I would like to have a look at it before I continue..

(for the purpose of investigating the results of a new indicator I need google to OCR the attachment )

 

So, would the VSA indicator be available in NT or ProRealTime code?

I ve seen bits and pieces al over the Internet, but since there is a firm discussion going on over here I was hoping to find some latest developments.

 

 

Cheers, Dutchy

Googleconverttotext.pdf

Edited February 11, 2009 by Dutchy

[sleepy v2 10]

Hi Eiger,

 

Thanks for your comments....

 

Not certian the bar following 5 was No Demand. It is hard to see that section of the chart and volume is active in that area. You might want to repost a clearer chart.

 

Entered short position on bar following No Demand bar (#5)... @13.19 (yellow highlight)

 

Sorry that was a typo ... it should have said.

Entered short position on the bar (yellow highlight) AFTER the No Demand (#6) bar ... i.e, @13.19

 

A better trade location would have been in the No Demand bars between 2 and 3 on your chart. Why is this a better location? Because you have clear weakness in the background at 1 and 2. Then volume increases to the downside following 2 and it looks like it might have just broken the low between 1 and 2. Lots of weakness there, which is then followed by a very weak rally. Note the narrow spreads and low, low volume. Either the narrow, No Demand bar where the first white diamond appears or two bars later as the market turns down would be very good entries.

 

Repost a clearer chart so we can make sure you are seeing the No Demand properly

 

Ive gone back and added all the No Demand bars A& B (both of which I admit not seeing orginially). Unfortunately I didnt discover this stock/trade until after the Upthrust (#5). Having said that .... if I had entered earlier (at A) I would have probably still tried to pyramid my position after the No Demand bars (B or #6).

 

It is for that reason I was wanted to know if my analysis was wrong, or if Id badly managed the trade. Further, should I have tried to exit the trade before my stop was hit once I saw it going back up ... or wait to be taken out as I did in this instance.

 

sleepy

Edited February 11, 2009 by sleepy v2

[tawe trader 10]

Sleepy,

 

You could also wait for a clear break of the ND low before entering. ie let the mkt activate your short entry. It's not a 100% guarantee of success but it you have kept you out of this losing trade.

 

Also, similar to what Eiger mentioned, the longer a decline (or rally) goes on the higher the risk in taking a no demand. The best risk v's reward ND's are after a top and a sign of weakness.

 

We have also recently discussed seeing ND's in the wrong place on this thread and I think the conclusion we came to, was that best option is to kind of ignore them.

 

Have a look back at the posts regarding this VSA topic, starting with Tasuki on post #2092 page 210.

 

Regards

Tawe