I've been trading for some years now and in that time I've seen very few discussions on what drives price action. I've seen a few threads on futures.io (formerly BMT) that tangentially discuss this using market volumetrics. However the question of which type of participant is behind the activity still remain unanswered.
On the daily bars, there are 2 primary types of buying activity, similarly there are 2 types of primary sell activity. How can we differentiate between each activity?
Daily bars:
Buying:
B1: When is buying "long term buying"?, ie buy to hold type kind of buying.
B2: When is buying "short covering"?, ie buying to cover
Selling:
S1: when is a seller exiting his long position?
S2: when is a seller initiating a short position?
After years of observing tape, here are my thoughts.
When markets make sharp long range bars at the bottom of secular down trend, we can assume that it is short covering. ie buying activity is caused by short sellers mopping up the float. recent examples bbry, nflx.
But how to tell if there are long term buy-and-hold type activity inside this short covering action?
When markets make narrow range daily bars, and lazy low volume intraday, most likely that market is being absorbed to be driven higher
But how to tell if there are long term short sell type activity building inside this accumulation action?
I've tried looking at the COT reports, fund reports etc. None have been reliable.