Micro patterns

[Milk Man]

Just having a look to see if I can find some micro patterns as nick mentions in his book. Here are a couple of charts I believe to be showing breakouts. Any feedback appreciated (havent looked much at discretionary trading much).

 

[Nick Radge]

Milko,
Here is the XJO. Look at the peak at the left. Look at the peak to the right. What can you see? Voila! (Hint: page 130)

 

[It's Snake Pliskin]

Milko,
Here is the XJO. Look at the peak at the left. Look at the peak to the right. What can you see? Voila! (Hint: page 130)

Nick,

What do you read of the volume on the second last trading day?

Snake

 

[tech/a]

Interesting to see what Nick thinks but it could be a possible blow off which could be seen as a positive.

Nick I notice you havent discussed your levels from the high and the retracement back through these levels for a buy?

 

[Nick Radge]

Snake,
Volume is three dimensional.

Firstly, how much volume. Is it high, is it low, is it ultra high. Volume is effort. High and ultra high means lots of effort.

Secondly, you must take volume into context with the price action. If volume is effort, then the price action is result. So you need to ask yourself, What is the result of the effort?

Lastly, you need to look at volume (effort) and price action (result) in relation to where it occurs. Does it occur at a high, in a range, at a breakout, in a trend?

Once you combine all these factors a very interesting story starts to emerge. Take a look at the bar before that gap. Note firstly that volume is high, almost ultra high (ultra high is measured through the cyan line). So there is a lot of effort here. Now the next question is, what is the result of all that effort? Well, prices opened, traded to a new high, the closed on its low. So you have a lot of effort and an attempt to move up yet a close on the low.

It occured in a small congestion area but more importantly it attempted to break out. Now note that the break out was on high volume, but that high volume means sellers, not buyers. If it were buyers then the close would be at the top of the bar, not the bottom. A lot of effort was put into the day by buyers and sellers but sellers won out and they were even able to overcome all that buying and close the price on the lows. Bearish.

The next day had ultra high volume. So, a lot of effort. What was the result? A wide ranging down day with a low close. Sellers remain very much in control. We know this because the close was low. A lot of effort and a very negative results.

The last day, Friday, shows a poistive day, but the close again is not on its highs, in fact its nearer the mid range than the high. Again, good volume, so a lot of effort going into this. You can see the gap gets closed and the days close is below that gap low. Sellers are still in control.

Always look at volume as effort, look at the price action of result and then take note of where its occuring. This last one is important. Look where the sellers are? At the all time highs? What does that mean? It doesn't mean that the market will fall 1000pts, but it does mean that plenty of people are not willing to bet that prices will go any higher. If sellers had been there before back in March, and they're here again now, then this market is currently capped until those sellers are overcome or they back off.

Take a look at the weekly and daily MGW chart. I took a position today. Would it be a long position or a short position?

 

[kaveman]

or was the volume because the fund managers are sorting their holdings at the end/beginning of month or the index constituents have been changed
oir was it a day of things like options when the new shares have to be registered

 

[markrmau]

Take a look at the weekly and daily MGW chart. I took a position today. Would it be a long position or a short position?

Looking at volume / price action, I think you took a long position. Would your stop be at $3 (3 days of resistance) or the low from the big drop 8 trading days ago?

However, if I read the latest MGW announcement correctly, a director just bought put options for 3.25M shares

Also regarding your earlier xjo question. My guess is that you see the current xjo trading as consolidation near the previous high. A break above 4700 would be extremely bullish - and would be a good time to go long. Do you have any signals on xjo to go short?

 

[It's Snake Pliskin]

Looking at volume / price action, I think you took a long position. Would your stop be at $3 (3 days of resistance) or the low from the big drop 8 trading days ago?

However, if I read the latest MGW announcement correctly, a director just bought put options for 3.25M shares

Also regarding your earlier xjo question. My guess is that you see the current xjo trading as consolidation near the previous high. A break above 4700 would be extremely bullish - and would be a good time to go long. Do you have any signals on xjo to go short?

I agree, long.

If volume represents action in price then buyers have come in. I haven't checked what happened today - I'll await your answer Nick.

Snake

 

[Nick Radge]

MGW = long. Well done, although I didn't get set.

Now take a look at OST. Note Fridays volume and the range. Then look at todays volume and the close. Also, those that have read the book, what can you see? (Hint: page 79)

Kaveman makes a valid point to some extent. Options exercise and off market transactions can make a difference to the interpretation. The activity of the fund managers still represent appropriate volume. We can never know the reasons behind the activity, but the activity will leave an imprint.

markrmau,
Your bullush scenario may be correct, but not whilst those sellers remain there. They need to be overcome or they need to go away. If they are overcome then we will see this by high volumes and high closes. If they go away, then we'll see higher prices but no associated volume. Why would they go away? Beceause they beleive they can sell at better levels perhaps? Who knows and we don't need to know. We simply follow the markets lead.

 

[Milk Man]

How about this one . Well you'll never see me this high in the comp again. Consolidation at the top of price range followed by breakout (and a half). Good news never goes astray either. Volume was another deciding factor; big spike on big up day. I know it worked this time but was it more a$$ than cla$$? :nuts:

 

[RichKid]

Now take a look at OST. Note Fridays volume and the range. Then look at todays volume and the close. Also, those that have read the book, what can you see? (Hint: page 79)

Thanks for the great posts Nick!

I haven't checked the book but here goes on OST, recent candles had high volume and low closes (bearish, sellers overwhelm buyers, sharp declines). Now we see a long tail high volume again but closing near middle of today's range after gapping down, some agreement on price at the middle there, tussle not over yet. So lower prices rejected as buyers stronger than those sellers down there but higher prices not achievable by buyers either- sellers won over in that high range.

Three issues for me, 1) will the buy strength remain? 2) will that gap be closed? and when? 3) What is the signal that the trend is changing to long again? double bottom? swing higher or just a break of the downtrend line? or just accumulation on tight ranges? hmmmm.

Eitherway the dowtrend has weakened somewhat but it's still down short term.

I like the simplicity and clarity of your posts Nick, nice style.

 

[Nick Radge]

Here are my comments to subscribers on the 30/11 so it can set the background for the following few days.

30/11:
I suggested on my last comments that buying had been sparse. Buying is required to drive prices higher. No buying, not much upside potential. Today shows you what can occur. We approached that minor trend line (supply line) and sellers moved straight in. High volume with a wide ranging day and a low close can only mean one thing: sellers. And they are now in control. Further weakness, perhaps toward $3.40, will now occur. The Chartist www.reefcap.com

So you can see the 30/11 marked on the chart. It hit that supply line, traded down on a wide range, closed on its lows and the volume was high. This can only mean one thing; sellers. It does not mean the market is going to tank, it just means that large sellers are keeping a lid on prices.

The next day marked as (1) had another wide range down. But notice the volume has dropped off from the prior day. Its still larger than average though. So here suggests that sellers are still in control but not as much effort was required to drive prices lower.

The day marked (2) is the crux day. This is what is important. A down day and a reasonably wide range, but look at the volume. None. This means that sellers are becming less interested selling down at these levels, or there are simply no buyers. Weakness of low volume tends to signal seller exhaustion.

(3) shows a gap open. A wide range and a high close compared to the low. But look at the volume. Its increasing again. The only way for the close to be that far away from the low is that buyers have emerged. If there were no buyers then the close would be on the lows. We know there is some effort going on because the volume has picked up and vecause the close is near the mid to high part of the bar, the effort is from buyers.

So, we now know that a transition from selling to buying is occuring. It may take a few days or more to develop and during that time we need to look for further buying evidence or contrary. Remember that this transition takes time. We saw it starting at (2) with the very low volume down bar and the suggestion that sellers are getting exhausted. (3) shows that buyers have emerged, so its now up to them.


Nick

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[Nick Radge]

OST up 3% today. The transition from sellers to buyers continues.

 

[RichKid]

OST seems to be following the market down, weak day. So are we to expect a ranging pattern with that tail low (3.20 ish) being a lower support level. If vol had been light on the recent down days it would have been better, so distribution instead of the expected accumulation??

I guess this probably highlights how the more evidence you have of the uptrend commencing short term the higher the chances of the analysis being correct.

 

[Nick Radge]

Just remember that the transition from sellers to buyers takes time and as such is why we simply don't just jump in. Look at this side of the equation as analysis as the starting block then, secondly, you need to work out the strategy to take advantage of that analysis.

 

[Nick Radge]

Milko,
Take a look at WPL over the last week and where it is in relation to the Sep highs. Here is the chart.



Nick

 

[RichKid]

Milko,
Take a look at WPL over the last week and where it is in relation to the Sep highs. Here is the chart.
Nick

My stab at this. Very high volume day at Sept high but buyers couldn't push prices higher so sellers must have won out as closed at open, selling was confirmed on subsequent days as prices fell again til buyers entered in late October (vol rose and prices stalled, then rose); recent top has low volume but no big dumps of stock like in September, prices coiling and rising slightly higher as buyers/sellers tussle, higher volume on a breakout would be more convincing.......it's now at around $40 so that breakout appears to have been successful. Prices are also above the September high so there appear to be more buyers convinced of this new breakout (but low volume suggests buyers are only partly convinced, on the flip side sellers haven't come in strongly either).

 

[Nick Radge]

Take a look at AMC today.