Yesterday the 1m and 1597tick chart told the same story of the sell-off in the June NQ futures contract.
It's a story about price range per bar and per wave in comparison to the volume traded, and it's over 100 years old. It was first told by Richard Wyckoff and it's still as actual and useful in today's markets as it was then.
Supply overcame demand which led to a markdown followed by an accumulation phase. After making a double bottom price printed the 1st higher high (HH) followed by a spring where buyers stepped in (Sign of Strength, SOS). The sellers tried once more to take price down but the heavy volume on the test of the low/spring wasn't enough to make a new low (Effort vs Reward, E/R) indicating that selling was absorbed by the buyers. Once it was clear a low was in, and defended by the buyers, one could go long with a stop below what now had become support.
230502_NQ_1597t
230502_NQ_1m
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Trading the FOMC. I am not a big fan of using exotic charts with all kind of indicators disturbing the view on price action but I think it's important to use charts which represent price and volume best in terms of trend, momentum, levels, liquidity pools and effort versus reward. One such chart is the Point-and-Figure chart.
I used a 4x2 PnF chart with HiLo bars for judging price movement of the June '23 ES futures contract. After the two o'clock FOMC Statement price made a (double bottom) swing low followed by a swing high establishing a range. Sell and buy orders gather below and above this swing low and -high providing liquidity ($$$$).
Half an hour after the FOMC Statement price broke through the low. Large operators used the liquidity provided by the resting sell orders to build a position. The OverNigth Low (ONL) was tested and acted as support. Then price was markedup and the same occured on the other side at the swing high. Here, at higher prices, they sold their longs and build a short position for the big move down. After the move up from the low, price printed a flag with a resistance level clearly visible on the PnF chart. Within the flag prices made higher lows. The last red bar before the breakout showed who was in charge. This bar traded as much contracts as six red bars prior but the range was short (E/R) and it didn't make a new low. Supply was absorbed by the buyers. I bought on the breakout for a run to the high and sold at the prior swing high target for 5.75 points. I should have sold the high after that (while cheering my winner). That's for next time. Know what to look for, and when.
230503_ES_4x2_PnF
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