a VSA chart a Day

[flatwallet 10]

Hi,

 

Since there seems to be quite a bit of vsa knowledge here, I was wondering if everyone would like to start posting one great VSA analyzed chart every day?

 

Flatwallet

[Anonymous 11]

If you post-it; they will come.

 

Just get the ball rolling and I am sure people will support the thread with screen shots and questions galore.

[TinGull 10]

From about an hour ago....

 

Note the stair stepping volume coming into the VAH pivot showing some action...big money buying into weakness and then, pop! So far, it's up 30 points from that pivot.

[torero 10]

I'd like to get involved and participate, but due to my limited knowledge, I'll just post my interpretation with expectation to be corrected by experts. Ok with everyone?

[walterw 10]

I like too see that keltner band addition Tin.... good chart indeed...

[Anonymous 11]

I like too see that keltner band addition Tin.... good chart indeed...

 

LOL. Walterw you do love the "squiggly line" stuff don't you.

[walterw 10]

Tin: I would like to know whats your exact entry criteria on that chart... thanks Walter.

[walterw 10]

Well Pivot, that wick its just outside of the Average True Range, but closed inside, yeah like does dinamic levels, I trade them all the time... Keltner especially... makes me more confident... they have a nice statistical performance on cyclical days like today....

[dalby 10]

it reversed near the VAH pivot, but it reversed exactly (to the tick) at yesterday's settle price

 

that is a pivot level i ALWAYS watch

[Vercingetorix 10]

I'm still new to VSA (been reading up on it the past few weeks), but I'll give this a shot. The chart is a daily chart of BIDU. I've made some handsome profits on the short side with this stock, but am looking for it to rally over the coming weeks/months.

 

First set of bars

1) The first bar here is a selling climax. It a down day with a wide range and excessive volume which closes near the highs. To give you an idea of how excessive the volume is, the float of this stock is about 26 million shares and the volume that day was over 14 million. It looks like a major transfer of stock occurred here. Earnings were reported after the close the day before, I remember because I was short.

 

2) The subsequent rally is littered with no demand bars which tells us we should expect lower prices to test supply.

 

Second set of bars

 

1)We get a down bar with wide spread and high volume closing off the lows. The news is bad because the Chinese stock market is down 9% and this is a Chinese company. The next day is an up bar indicating that there was buying in the previous down bar, however it closes off the highs and still has high volume. There is supply in the market still. The next bar makes a lower low than the previous two bars and closes near the highs. This is a test. Despite the volume being lower than the previous two bars it is still above average. At this point we need more information. If the next day is an up day than this will be a successful test (supply has been removed) otherwise it was a failed test (supply is still present).

 

2) The next two days are down days indicating that the previous bar was a failed test and supply is still present.

 

3) We get a short lived bounce that occurred on no demand bars. Expect more testing/lower prices.

 

Third set of bars

 

1) I don't glean anything new from the first 3 bars. It is the fourth bar that catches my attention. This is a down thrust bar (wide spread down bar on high volume closing near the highs) which is intended to stop out longs and sucker in new shorts. I remember watching this stock fall $6 in the first 20 minutes of trading. The news on this stock was bad and we sliced through the widely watched 200-day ema. Any weak longs that were clinging to hope surely got stopped out here. Aggressive bears were suckered into entering a bad position as well.

 

2) The next four bars show a complete dry up in volume. For the first time it appears that supply has been absorbed.

 

Fourth set of bars

 

1) The first bar is a an up bar on above average volume and above average range closing on the highs. This is the first healthy up bar we've seen. After seeing the previous action this bar is very encouraging.

 

2) Any excitement is put on hold as we see two bars which look like no demand. This of course does not change any of our past analysis, all it tells us is that further tests into the previous areas to the left to test for further supply is possible. This shouldn't come as a surprise. Before the professionals mark this stock up they must be sure that supply as been removed and the stock can rise unencumbered by weak longs trying to get out at break even. I would be very surprised however if we make new lows. What I imagine will happen is we will end up forming a reverse head and shoulders pattern by making a higher low on this next series of tests. This week should be interesting for BIDU.

 

 

Further considerations:

 

1) Ultimately I think the accumulation phase is coming to an end and the stock should rise to all time highs. Predicting future prices is a dicey proposition, but with such a large transfer of stock from weak hands to strong hands the stock is poised to do so.

 

2) Unrelated to VSA, the short interest is 10%. Not excessive by any means, but it should provide a good amount of fuel to drive prices higher. Whether this is important to a chartist or not is debatable. I generally try to ignore all non-technical information, but I believe such information is of use when looking at a longer time frame because it represents potential imbalances in supply and demand.

 

3) Analyzing stocks on a daily time frame is difficult because many times there will not be enough activity to analyze. I have noticed this is especially true on the really small and low volume stocks (I'm not talking about bidu, but much smaller stocks) which makes VSA either difficult or near pointless. Looking at a weekly, or even monthly, chart is advised. Remember that the point of VSA is to detect professional activity, if there is no activity to detect then the method proves of little help.

 

4) Since I am new to VSA, I have trouble at times having faith and confidence in my analysis. This especially true in this stock because I had expected it to recover much sooner. I saw the strength on Feb. 18, and thought the stock would go higher. When the stock eventually fell as low as $94 I began to "lose faith" in this method and/or my own skill. It is important that background strength or weakness does not 'disappear'. This is why I think confidence is huge component of a successful trader which I am still working on becoming after a year or so in the markets. Naturally this does not mean that you should bet the farm with out a stop. I may very well be wrong here and currently do not have an open position in the stock.

 

5) I subscribe to John Carter's newsletter at tradethemarkets.com. I do not mean to bash John in any way, indeed I have read his book twice and think there is much to learn from him, but strongly disagree with his analysis that the stock will continue lower. The shortfall in John's method is his reliance on moving averages and the 'ttm trend' to detect the trend of price. This is a perfectly valid method, but designed to smooth out data thus eliminating the subtleties that each bar contains ( Read in between the bars ). This shortfall was apparent when he was looking to short a rally in the dow after the one day reversal on Mar. 14. I was surprised because after that day I became extraordinarily bullish. This is rare for me because majority of my trades are on the short side and I dislike going long. This has further reinforced what I have read that a trader must always formulate his own opinions. I apologize for such a long post, but I would like to cap it off with a quote from Wyckoff (I just ordered some of his books and am waiting eagerly to read them) :

 

There are men who will take no initiative on their own responsibility, who will undertake nothing without consulting others as to the feasibility of the schemes and plans they have in view. When a man puts more confidence in another than in himself he is bound to lose all will power and become a mere dependent, awaiting orders as to the course of action. It is impossible for such a man to get along in the world and make a success of his own life. When opportunity comes along he is afraid to seize it without asking his neighbor's opinion.

 

[Anonymous 11]

Very nice and welcome aboard.

[flatwallet 10]

I am not good at this by any stretch but here is a trade I should have pulled off but I was way to unsure.

 

 

Based on 15 min charts:

First 4 bars contain unusual volume with wide spreads. The 4th bars closes in the lower half of the bar.

 

The 5th, 6th, & 7th bars all have lower volume associated with them. Here I was unsure if 7th bar would be considered a no demand bar. However since the price retraced on lower volume, I was scared to pull the trigger.

 

The 8th bars looked promising as the volume was almost equal or greater than the previous 2 bars. For me this was confirmation that the bottom was set. I would like to have bought at the open of the 9th bar.

 

13, 14 & 15th bars were small pullbacks on lower trending volume. This would have been a nice dummy style entry. The only concern might have been the Opening range resistance.

 

Where would you guys have entered and why?

 

Thanks,

LP

Flatwallet

[flatwallet 10]

I'm not sure how to attach image but here's

[Soultrader 12]

Heres a chart for YM for 3/27/07. Exact same action as 3/26 with a volume spike and a lower low on less supply. The first, second, and third test are all at the S1 pivot (green line). Volume is alot lower on the second test and even lower on the third. LESS SUPPLY.

 

Took a long at the second and third test at 467 & 469. Im my opinion a safe high probability trade with minimal risk.

 

[flatwallet 10]

ST,

 

So would you buy off the S1 levels immediately or wait for the next bar to be green. How would you know that it's safe to buy or that the down move is over?

 

Flatwallet

[Soultrader 12]

ST,

 

So would you buy off the S1 levels immediately or wait for the next bar to be green. How would you know that it's safe to buy or that the down move is over?

 

Flatwallet

 

After identifying that there is lower volume on the test and is right at the S1 pivot, I will enter strictly off tape. I want to see tape prints disappearing off the lows and will try to enter when price comes back 5 ticks or so from the lows. Its pretty impossible to explain in words... I wil try to record this next time.

 

One thing.. I posted a 15minute chart. I trade off the 5min which also showed lower volume on the test.

[flatwallet 10]

ST,

 

I look forward to viewing that session. Please if you can, include the tape readings as well. I am completely ignorant to reading tape but I head it can help a lot.

 

Thanks

[Vercingetorix 10]

Follow up on BIDU. The markup process has begun. BIDU releases earnings after the close. This should be interesting, let's see if VSA can predict what the stock will do after 'news' is released (I've usually found that the direction a stock will be taken is determined before the earnings ever hit the wire).

 

 

edit: It's 134 after hours. How sweet is that.

[flatwallet 10]

Would April 9th have been construed as a No Supply day

[Vercingetorix 10]

Yes, that was a no supply day. If you look at the volume you can see that the weeks before today the liquidity in the stock really dried up, allowing for the stock to rise 30+ points in 3 days (counting today's after hours action). It will be interesting to watch the action tomorrow to see what the professionals will do. I think that they will gap the stock up above 134 to put it in new 52-week high area which would put all all shorts in the red, from there they'll either distribute or hold on to the stock and let it run.

[flatwallet 10]

Vercingetorix,

 

Well I hope you made a boat load from that trade. I wish I knew came across this chart and bought some black swan options on BIDU.

 

Flatwallet

[Vercingetorix 10]

Vercingetorix,

 

Well I hope you made a boat load from that trade. I wish I knew came across this chart and bought some black swan options on BIDU.

 

Flatwallet

 

Thanks Flatwallet. I bought some May 125 calls for 0.45 last Thursday. They're currently worth 7.5, but I think I'll let them go by the end of the day. By far my best trade in 18 months of playing earnings. These are once a year type plays.

[flatwallet 10]

Well now you can get the next 16 picks in a row wrong before you give all your earnings. Well done.

 

One a similar note, how do you go about scanning for no demand, test or up thrust bars. I would be very interested. I think you're playing the VSA stuff the right way. Identify and buy some out of the money Black Swan options. You need about 1 in every 10 correct to make a lot of money. I had a similar call in AMGN where a .05 option turned into 4.80. Unfortunately it was only papaer money as the whole VSA concept is really messing up my current breakout trading system. I prefer VSA but it's hard to give up on old habits.

 

Anyway wanted to say Congrats...

[Vercingetorix 10]

Well now you can get the next 16 picks in a row wrong before you give all your earnings. Well done.

 

One a similar note, how do you go about scanning for no demand, test or up thrust bars. I would be very interested. I think you're playing the VSA stuff the right way. Identify and buy some out of the money Black Swan options. You need about 1 in every 10 correct to make a lot of money. I had a similar call in AMGN where a .05 option turned into 4.80. Unfortunately it was only papaer money as the whole VSA concept is really messing up my current breakout trading system. I prefer VSA but it's hard to give up on old habits.

 

Anyway wanted to say Congrats...

 

 

I have no way of scanning for specific VSA patterns since the software I use (quotetracker) doesn't have any chart scanning abilities, although if you were able to program such a thing in another charting package I would be interested. I ran across BIDU because it's been on my radar screen for some time since this is the third time I've played BIDU earnings, each time profitable. I'm running through some charts for companies reporting earnings next week. If I find anything good I'll post here. I've found that out of 50 earnings releases there might only be 2-3 worth playing; the rest are too much of a crap shoot because the chart is not clear.

 

I know what you mean about thinking differently when it comes to VSA. VSA is still a new concept to me and before I would rely heavily on moving averages and MACD/RSI divergences. I still throw those indicators up on a chart sometimes because they're like having a crutch. A chart with nothing but price and volume can seem intimidating.

[flatwallet 10]

"A chart with nothing but price and volume can seem intimidating"

 

Man you hit the nail on the head. However, under current circumstances and knowledge level, it's tough to scan for interesting stocks without using a some indicator as a filter. Currently it is hard to view 1200 charts one at a time.