Hello Traders!
Here are two examples I have prepared for this thread…
It is not often that I get to study volume, because I can only access
it once I am home and it is on my girlfriend’s laptop, so I took this
opportunity to make a couple of chart screenshots and comment on them,
using what I studied in Coulling’s book and in Emeraldorc’s videos…
In the above example, we can see on the EUR/GBP hourly chart (between 12th June and today, 30th June)
how on the 12th June the large red candle highlighted in orange is backed by an equally conspicuous
volume bar below it: this, according to Coulling (and Wyckoff), represents a real move; indeed, this took
the pair from above 0.8050 through 0.80250 and eventually through 0.8000 (a major level); however,
volume trickled away almost immediately after that initial bear move, thus the pair did not continue its
journey south, but stalled and reversed to test the 0.80250 level, and then getting stuck in a range
between that and the 0.79750 one (marked as the lower red line on the chart)… Are you with me?
Similarly to the 12th June example, the large volume bar on the 24th June, also highlighted in orange,
backed the bullish move seen in the chart, and pushed the pair back above the major 0.8000 level;
however, volume dropped down immediately after, leaving this move powerless, and the pair failed
to make much progress…
So, in both first and second instance, we saw that the large volume was accompanied by a large
candle, which guaranteed a break-out/rally, although the follow-through was muted due to falling
volume; in the third example, however, from the 26th June, we see how an immense volume bar
(above 80,000K) failed to generate an equal amount of movement in price, or, in other words, the
size of the corresponding candle on the chart was minuscule compared to that of the volume bar…
What followed the move shows that the pair went nowhere in the following few hours, as the discrepancy
between volume size and price movement means that it was a false move, or rather, one to be cautious about…
Here is my second example:
I chose this pair because GBP/USD mirrors the previous pair, to some extent…
What we see here, in the first instance from the 24th June, again highlighted in an orange box,
is a high volume matched by a large (red) candle, pushing price below the significant 0.7000 level;
however, falling volume after the breakout/rally means that the move loses strength and in the following
two days can be seen reversing to the same level before the bearish move…
In the second instance, from today, we see how the large volume bar was accompanied by a large
(bullish) candle, pushing price from 0.7050 to just short of 0.7100; consequently, however, this
breakout fizzled out because the volume tumbled down to very low levels…
Although the pair has pushed above the 1.7100 level, the lack of supporting volume denies its
rally the strength to push it forward, at least until the next volume rush… And, with the EUR/GBP
‘oversold’ (a word to be used with caution) resisting to drop below its 0.8000 level, we could have
an inversion in tendencies, brought about by price logic: GBP(/USD) ‘overbought’ becoming too expensive
and being sold off (or rather bought by the market makers from us, who sell it to them in a bear wave)
from 1.7100, and EUR(/GBP) becoming cheap enough to buy back (or rather sold by the market makers
to us, who buy it off them in a bull wave) from 1.8000…
What does Professor Emerald think about it all?
Cheers
