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Swing Trading Futures

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  #71 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Trying a long in Sugar now at 19.68. Breakout of Wedge on weekly.

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  #72 (permalink)
Cheltenham
 
Experience: Advanced
Platform: InvestorRT, NinjaTrader
Trading: ES
 
Posts: 54 since Jan 2012
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karoshiman View Post
What is your trading suggestion for the current price level?



Chart layout

Price is on the top panel of this weekly chart. The blue bars are high volume bars and the yellow are low volume bars, relative to the recent, prior volume. High volume at the top of move up is a sing of weakness (SOW) as it suggests that the smart money are using the demand to sell or to go short, especially if the spread is low and the close is well below the high. High volume bars at the end of a move are a sign of strength (SOS) when the spread is low and the close is off the low of the bar, since this indicates that the smart money are accumulating.

Low volume bars at the top of a move (on an up bar) demonstrates that the demand is weak, which is a SOW called "No Demand". Low volume bars at the bottom of a move (on a down bar) is a SOS, especially when the spread is low and the close is well above the low of the bar, because that indicates that the supply has dried up. Such bars are called "No Supply" bars.

The second pane is volume. The volume is blue if the price is an up bars, red if price is on a down bar and the pink bars can be up or down bars, but the volume is less than on the last two bars.

Ignore the third pane, which shows the spread of the price.

My VSA Analysis

Lets start by looking of the bars with the highest volume (A) and (B), since that shows the price levels where the largest commitments were made by traders. These bars must include activity by the smart money, since they have the largest pockets.

At (A) we see a bar that was marked up well above the last bar and then the price collapsed to the low on high volume. That price action is called an upthrust in VSA and they can occur with low volume too. With a high volume upthrust the smart money were selling. This is the first point of supply. It is a SOW, but the smart money can't exit large positions in one go and the selling was not enough to stop the up trend. However, notice that price was weak until there was a test of the low of (A) in January (that bar is not marked).

At (B) we have ultra-high volume on a down bar with ultra-high spread, but notice that the close is off the low of the bar, so there must have been some buying on the low of that bar. That inference is confirmed when the low of the bar acted as short term support, but notice that the up-bars near (C) are no demand bars and (C) is an upthrust on high volume. The market remains weak at this point and the up move is technical, because of temporary exhaustion of the sellers.

Bar (D) stops near the low of (A), which shows the usefulness of looking at price action at the key levels of high volume bars. From the low of (A) to the close of (B) we have a trading range after bar (D).

The volume on D was less than on (A) and the close was in the middle of the bar, which is a SOS. However, when price reached the close of (B) at the 35.8 level it found resistance, which is to be expected since traders locked in from bar (B) and above are looking to exit at break even or better. It would take high volume to push price higher that that level, since the smart money would need to absorb the supply (that's high volume, but not excessive). They would be most likely to do that after a period of accumulation at a lower price level, which we do not see after (A).

At (F) we have a retest of the low of (A) and (D). Volume is very low, so we have a no supply bar and the close is in the middle of the bar, so we know that there was buying. The test is not confirmed until we see that the next bar is up. That pair of bars is a SOS.

At the bar before (G) we see high volume, which is a warning that supply may be entering the market. (G) is a high volume upthrust and the close is below the top of the trading range. That is a clear SOW and the market moves down to retest the bottom of the trading range.

The bar at (H) has very low volume. The bar can be viewed as a test as the low was lower than the previous bar, but the picture is not totally clear, since a lot of the bars range is above the close of the prior bar, so it can be seen as no demand too. However, the following bars continue to show support and the low of (H) is not broken. That is a SOS and we get a retest of the top of the range. Again we see high volume creep in at the top on (I) and a low volume upthrust on (J). A low volume upthrust indicates that the smart money was not interested in buying at that time and price.

At (K) supply come in as the high is above the prior bar, the close is near the low and the volume is high. However, the range is average, so it looks like there was some buying too. The next few bars are weak bars and the weakness is confirmed when the second bar after (J) closes below the low of (J).

At (L) we have a wide spread down, but the volume is less than on (K) which shows that the supply is not as strong. The next bar is down on low volume and the next and last bar is up slightly. That looks like a SOS, but there are reasons to be cautious, because the background is weak and not strong. We need to consider the context rather than individual bars.

The close of (L) is in the middle of the trading range, which is the worst place to buy or sell based on the risk reward ratio, since the best stops will be above or below the trading range. Also, since (B) supply has come in above the 34 price level, so any moves up are likely to hit resistance and there is no obvious signs that accumulation has occurred on the prior lows. A clear sign would involve a shake out or climatic selling on high volume.

There is a zone of congestion around bar (H), but there are no clear high volume down bars in that range, so this may just be a pause in the selling to provide an opportunity to sell more at higher prices, which is what we see happening on bar (I) to (J).

The down trend from (B) appears to be intact, but there may be a move up from (L). If so, look carefully at the volume when the price comes near the close of (K). Low volume will indicate no demand. High volume will be needed to absorb supply at that level, but excessive volume would be sign of selling.

If the price comes back to the 26.335 level, it would be safer to go long after SOS at that level, since your stops would be close to your entry and the target would be the top of the trading range. However, that is the level where a shake out is possible, so look for a SOS first and be careful to select a sensible stop.

Any substantial move up is going to hit supply from locked it traders, so I would be bearish on silver unless until there is a sign of capitulation. A good move down with high volume bars that stand out clearly would show that the weak hands have given up and sold at a low price to the smart money. Clearing out the weak hands would allow the market to rise, since the smart money would not need to absorb too much selling at higher prices.

So, I see a bearish picture for silver for the time being.

It should go without saying that this is my reading of the market for academic use only and that you should not rely on my comments to make trading decisions. I could be completely wrong and it would not be the first time!

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  #73 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Recap: NG & W trading lower as originally expected. Covered short pos. too early. Traded too big, hence, were too nervous

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  #74 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Short Soybeans from 1376.75. Head & Shoulder Formation.

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  #75 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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pawnbroker View Post

...


Thank you for the detailed analysis! I will follow this closely.

Cheers,
k

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  #76 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Out of Cotton long at 74.24 with a loss. Turnaround still possible, but choose to reduce my risk. Might re-enter long again later.

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  #77 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Trying a long in Nasdaq at 2718.50 after the triangle breakout and flag of the last few days.

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  #78 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Short in Cocoa from 2269 yesterday (sorry, forgot to post). Breakout of triangle on daily.

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  #79 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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karoshiman View Post
Short in Cocoa from 2269 yesterday (sorry, forgot to post). Breakout of triangle on daily.

And here's the chart.

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  #80 (permalink)
Munich, Germany
 
 
Posts: 285 since Apr 2012
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Took part of profits in Cocoa at 2227. Let the rest run.

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