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.
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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:
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:
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