Thank you so much for this thread. It is invaluable! May I ask for some guidance on the following stock - how would you interpret the bars?
As well as the attachment below, here is a link to a much clearer/larger image. ht tp://oi39.tinypic.com/1zbdi7o.jpg
We had a few months accumulation area/trading range, which it then broke out from.
1. I bought in here on the breakout from the trading range.
2. VERY HIGH volume wide range bar appears here. Could be hidden selling?
3. Even higher volume and wide spread closing on the lows (and even opened up). A classic upthrust with obviously a lot of selling going on. I chose to get out at end of the day on this bar. This would seem pretty standard, correct? I've seen this scenario appear often, and inevitably, it results in a retrace of some kind.
4. The retrace is showing no supply bars (I think). The volume comparisons confuse me here and later on in the chart. It is low volume in relation to the first 3 volume bars when the rally began, but it is still high compared to volumes when in the trading range. Which should I compare it to? I am now looking for a successful test to enter again after I see these no supply bars.
5. A low(?) volume test that is successful on bar 6.
6. I enter long again here at the close of this bar. HOWEVER, I am worried that it is showing NO DEMAND. Is this something I should be worried about at this point?
7. The bars around this point all show tails above (in the area of previous supply). Having seen the no demand at 6, I am worried that these upthrust type bars may mean I have entered incorrectly?
8. I am still in the trade and the volumes increase and go through the area of supply. Is this volume again considered VERY HIGH volume, like the bars at 2 and 3, or is this now simply HIGH or NORMAL volume when you look at it against the retrace. Again, what am I to compare the volume to? I am now worried I may see the same pattern that occurred during bar 2 and 3.
9. It is not an upthrust like bar 3, but it is on very high/high(?) volume again and closes off the highs in the middle of the bar. Is this a point I should be getting out? Or does it simply show that we don't know who is winning the battle?
10. The stock gaps down big on the open after an RNS statement from the company is issued (standard requirement after a large move in the stock) stating that they are aware of the surge in price and that there is no imminent news. People get spooked on these RNS's and often sell out of fear. This bar has high volume also and closes in the middle. Again, what should I be taking from this?
11. The market gaps up and goes higher on even higher volume again. Is this a good sign that the drop was in fact full of big buyers taking advantage of the fear drop? However, with the higher volume, does this again involve a lot of selling? I think we need to wait for the next bar?
12. A mid close on still quite higher volume. More churn between buyers and sellers. Is this a negative sign after bar 11? I don't know how to interpret this.
I know that weakness comes in on up bars and strength comes in on down bars, but despite reading Master the Markets and a lot on VSA, I am still slightly confused. Should we be analysing all down bars when during a rally also? For example, even if I have seen no signs of weakness on the up bars, if I see volume that is high volume (or at least not low volume) on any down day/bar, I get worried that this is more supply appearing in the market. These down day bars are irrelevant if I see no weakness on up bars though, right? Because smart money can only get out on up bars.
Last question: How is the market able to move up again in the above chart at point 6 and onwards, after the heavy selling by big money at point 3?
Thanks a lot. Your thoughts are very much appreciated.