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A sign of weakness bar is also considered a supply bar. A supply bar may not be a sign of weakness. We usually see a SOW on the right hand side of a trading range. A supply bar can occur anywhere in a Wyckoff sequence. A SOW is more specific than a supply bar. Both have large ranges down and increasing volume.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
As a trader, I don't like to buy options with 30-40 left to expiration because this is where the premium erodes rapidly. As far as this specific chart is concerned, the sideways action after the move higher is most likely some time of accumulation process. But keep in mind, longer term, the trend is down. So this trading range you identified can rally to an area that will induce sellers and some type of ending action.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
Gary, I am wondering if the ES is building a major top right now? We had increasing volume from 1410 to 1360, and now during the bounce up to 1390, we don't see much volume on this up leg.
The whole rally, that we've had from 2009, has not been on high volume. As many retail customers have been on the sidelines. So most of the volume you see is institutional volume. I don't think high volume will be the norm for now. Regarding this particular trading range, I believe the key support is the 1353 area, and key resistance is the 1420 area. Since we are trading on the right side of this trading range, this usually resolves itself with a sign of weakness or a sign of strength. so a move outside this trading range, with increasing volume, will give us our clue. We must consider that the stocks market has been in an uptrend and it will take supply through support with follow through to have a change of behavior. The odds, due to trend, lean toward bullishness, but that can easily change.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
I came across a list of Wyckoff concepts that attempt to summarize how to read a vertical chart the Wyckoff way and I like to get your opinion of what it is saying. Do you think these are accurate discriptions of how to read a price and volume chart?
The chart you presented I would say is generally correct, but can vary with the different phases of the Wyckoff cycle and trend. I thought the spelling of "Whckoff" was interesting.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
Do you think the statement "Price movement should always be proportional to volume." is the correct way of looking at the charts in any Wyckoff phase? I assume that if price movement is not proportional to volume, then a change in trend is to be expected such as in a Price/Volume divergence?
As a general rule, price and volume should be proportional. However, they could be out of whack as well, so I wouldn't read one bar with one volume as the catch all, tell all. We should look at price and volume in an area to tell us, versus only one bar. As I've said before, you need to try to understand the "story" of the market, versus looking for a small snapshot. For example, on days when reports happen or "event" days, you may see a disproportionate volume versus price.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. The opinions expressed here are those of Gary Fullett, and are not to be taken as a recommendation to buy or sell commodity futures or options. This is for educational purposes only.
