Oh i see i always thought that a big volume spike meant that the bulls have gotten a huge momentum leading to a continuation of price increase. Can you explain to me why a big volume spike means that the longs have gotten trapped?
Everyone in hindsight has the "perfect" explanation look how crowded the replies got, food for thought.
Anyone want to try their hand at drawing out the next few days of this chart? xAxis = Fixed volume bars.
I apologize in advance but I'm going to have a little fun with this. Its a "hindsight question"...not a real-time question asked in a chat room. Thus, it makes sense that the replies are "hindsight". Also, there were actually only two trade analysis replies by harami and Handle123. Unfortunately, the info provided by the OP is vague and nothing more. For example, Op said it was textbook without any verification of such and without verification its being used in a complete trading plan. Simply, if someone starts a thread and states I enter here and exited there for a loss...what did I do wrong...its hindsight question and the replies are suppose to be hindsight but not perfect considering the replies will be different from each other. In contrast, Tavurth has posted a chart with no info about the trading instrument (that info has been removed or not included) except for the "Fixed Volume" as a candlestick chart...the replies will be random or vague in comparison because some traders use indicators and those traders can not plot their indicators on a chart they have no info about the trading instrument. Just the same, traders that don't use indicators still need info about the trading instrument. For example, a fundamental trader wants to know the name of the trading instrument because he/she needs to review fundamentals, earnings and such to make their decision on price direction. Without trading instrument info...replies should be expected to be all over the place...Why? For example, pretend that's a Forex EurUsd chart. Now post the exact same price action chart and call it GOOG (Google). Now post the exact same price action chart and call it Treasury ZB futures. Again...post the exact same price action chart and call it VIX. Again...post the exact same price action chart and call it XYG Chinese Airline stock. That above context involving just knowing the name of the trading instrument impacts greatly a traders decision about the price action. Without that simple context involving something as the NAME of the trading instrument...it truly is just a wild guess. Ok, I had my fun now. Bye all. P.S. Funny private message...if its a chart of the price of Cashews...that would change the context of the answer. That stuff has been getting expensive lately (hint: rising wages of workers that harvest them and rising health awareness/consumption in China). Answer - Expect higher Cashew prices.
people will only play if you provide the information needed to find the chart in question and SEE what actually happened in the days after so that they can then get the 'right' answer
So you're saying that TA/Price action only 'works' when you already know what happened. There's a shocker! lol
Cash Clay, You should think of Volume Level as the degree of disagreement among traders about price action. If the price is moving up and the volume is low, it means that there is little disagreement that the price should be moving up. If the price is moving up and volume is increasing, it means that more and more people are beginning to disagree with where the price is heading until they are screaming "stop!...Turn around!". If you think of it this way, you can see volume is a powerful tool. It also works well on the way down. Look at any chart that has price and volume and spot the places where the stock crashed. You'll usually see a big spike in volume. When the price got low enough, there was a great amount of disagreement that the price should keep dropping, so it stopped. Once the stock bounced, the volume dropped down because there was less and less disagreement that the stock should be rising. Tavurth, you posted a chart without volume and asked for a prediction...you should realize you're providing only part of the information. (unless I am not understanding what a fixed volume chart is). You can use price and volume action alone to make some pretty good predictions, despite what the naysayers believe, but diversifying is an important part of the process. And lastly, predictions don't go that far out in the future. When I swing trade, I can only pick the general direction that I'll likely see the next day, in absence of any disturbance. It isn't much, but its enough. All that being said, FWIW, I do see a sell signal in that chart off the price action alone, but it would be nice to have some confirmation with volume. I believe over the next 3 to 5 days, the price would drop...it looks like a "pop and fizzle" to me. SM
In my opinion, it doesn't matter what the next few bars look like as its not my job to say what will happen, but rather what I would do based on what is happening. Here is how I read this chart. A - This was a serious level of resistance that eventually broke here. B - Price got this far up before heading back down, and breaking through the R. C - Price only dropped down this far and stopped just shy of the previous swing low at D... quite bullish. Then there is sideways action, with the level of B holding firm as R this time. E - We have of lower high, can't break through, so we head lower, but we form a double bottom at F. If you were to ask me what I would do at F, I would have bought just above F, with a stop below that previous swing low. So now that we bust through and make it to G, it retraces only down to I, and we make an attempt to break out above G, but we seem to stop just below at H. A strong breakout like this I would look to perhaps fade, but it all depends on what price was doing in a lower time frame as it approached H. Clearly price couldn't move above the high at G, but the low of the retracement at I is quite high up, and hence price didn't retrace that fast move up all that much. That last bar sits essentially in the middle of the high at G, and the low at I. So I would wait to see what happens as we approach G, and either short, with a stop just above if it starts to look weak, or I would wait for price to drop down to I, and look to go long at the level of I, with a stop just below. If we break through "I", we might head down to the level at B, and perhaps have a case of resistance then support, but I would be only looking for trades at the level of G, I or B. So I guess what I'm saying is that it doesn't matter what the next few bars looks like, what matters is what I would do about it as price approached one of those levels. Of course I have no idea what instruments this is, or how it moves, but based on what I see, its quite tradeable.
WOW thank you for that smart money. that was some really great adivce youve given me. I had head from people look to see increasing volume when a breakout is about to occur or is occuring. A rise volume is always a good thing. But every freakin time i do the stock goes in the total opposite direction, so thank you for clarifying that for me!!!!!