There are days when once price makes an early strong move to a particular level, everything just stops. Trading activity falls off as if everyone is just done for the day. Instead of falling on a trampoline, it feels like price has moved into a swamp and everything has become soft and damp. At (2), price is congesting immediately after making a sharp low. This is very different than Reversals in which everything is sharp. The initial pullback as well as the retest. Reversals off this kind of action are high quality. And while congestion does often occur before the eventual Reversal, it is more often occurring well above the Highs/Lows, unlike this example where congestion starts at the low itself. This kind of overlapping congestion also occurs in instances before the move to a new level is made. But these instances normally have energy in them, such that it is worthwhile to play a break. [/quote] If the market never entered periods of notable congestion/chop then big money wouldnt ever have a chance to buy/sell below/within/above the congestion. You can use prior volume profile data to help predict where these types of areas are going to happen. Look at the previous weeks prior to this week and you'll see defined high volume areas and low volume areas (which prices moves through quickly or rejects). This is how you can anticipate heading into these areas - price has already been there and how much volume it traded through has left it's mark. Even if you go back prior to the 15th and chart everything from 4/18-5/14, the prior chop zones are still present: Additionally, take note of the fact that price was rejected above 4500 and sent back into this area which is presently at the top of the value area from 4/18-5/14. It may try to head back up there again, but just remember that it was there once and rejected already:
BTW, since we were previously talking about SC and volume bars I decided to compare your 1m chart against a 400 contract volume chart using the exact same start and end times just to show how things appear different (note: my timezone is 2h before yours):
Thank you for the detailed charts. Using volume distribution to derive potential levels is an important part of my approach. I am sure you are well aware that the profile is dependent on the date from which it is measured. As such, it does not account for information decay. Based on my approach, prior to the Open on Friday, the trades that occurred at this level on the 24th, 28th, 29th and May 4th were not very important in terms of establishing actionable levels. Price sliced through this level on May 14th. This shows that it did not exert much influence and thus was given much less weight as price traveled back down to it. The important thing here was the way price traveled to 4508 and it's inability to continue up shortly after the Open (as you have mentioned as well). That 4508 was a previous extreme from May 4th gave it more informational weight. I believe approaching the markets from the perspective of value is extremely helpful. But since the auction is always evolving, this is a rather crude approach if that is all that the trader uses (when does the 3 Day Auction become vastly more relevant than the 10 Day Auction?) . I am beginning to see that combining the way price gets to a level, it's action at that level and it's distance from a dynamic Value area offers a more relevant measure of context. At the end of the day, it all boils down to one thing - How much potential bang is there? Thanks for the CVB suggestion. I played around with it. But I don't think I will be using them as a visual aid for tactics. For one thing, I have been using time based charts for 2 years now, and there is a certain amount of implicit memory that is starting to build. While I use volume in terms of assessing larger context, I have been entirely clueless about its workings at the tactical level. This is something I will start working on. For now, I will work with raw volume numbers and start characterizing my market in terms of how much volume is traded, and at what time. The example I gave earlier may have been a bad one. My initial inquiry was not to figure out ways to avoid chop or how to find key levels. I was looking for suggestions on how to easily measure the quality of action that occurs within Ranges. Both these Ranges could have a similar volume distribution. But the way in which price moves within the Range holds valuable information. Once again, thank you for the detailed reply and CVB suggestion. I see that you are good with manipulating SC charts. I am not. So I may ask you for more help down the line.
Too bad, 'cause though you provide only a snippet, the first appears to be an accumulation/distribution base and the second a state of equilibrium. The volume for the first would have provided a clue as to which it was and the volume on the second would most likely be consistently low.
Regd the AD cycle: Would you say that this dynamic is as relevant in index futures versus a specific stock? In index futures, do the larger number of participants and lack of any one controlling pool invalidate or dampen this dynamic? What kind of volume distribution could one expect to see for AD?
Something with a float, particularly a small float, is more susceptible to this sort of manipulation. Something like MSFT or AAPL is less susceptible. As for the A/D volume characteristics, you have the material, though you may have forgotten. Email me if you can't remember.
%%%%%%%%%%%%%%%%%%% Actually quite helpful; + trend study of price +volume can be real helpful.Wisdom is profitable to direct; NOT a prediction...........................................................................................