Sector Analysis Using Pure Price Action
- Thread starter Gringo
- Start date
A few years ago there was a conversation I had with a six or seven year old. We're at a lake and the boat is coming in to take him for 'tubing'.
While we're waiting, I tell him to watch out for the sharks.
The kid turns around with a confused look and says: "I thought sharks were a salt water fish; why would they be in this lake?".
I had a mental freeze for a second or two from the shock of this reply. As I recovered my composure, I looked straight in his eyes and said without flinching: "......exactly......your tube's here....".
Gringo
While we're waiting, I tell him to watch out for the sharks.
The kid turns around with a confused look and says: "I thought sharks were a salt water fish; why would they be in this lake?".
I had a mental freeze for a second or two from the shock of this reply. As I recovered my composure, I looked straight in his eyes and said without flinching: "......exactly......your tube's here....".
Gringo
Quote from Gringo:
Nice work Niko. I am going through one by one and quite a few look almost the same. I'll keep posting them separately simply because my colour scheme looks prettier than yours
Gringo
Yep, your colors are always better.
I am posting the daily view. Mostly REVs occurring within the context of the weekly uptrending TC. A couple of markets stuck in a hinge ( XLU and XLP).
XLE daily is showing early signs of weakness. These could be from demand getting exhausted after pushing the price beyond the overbought position line. Volume isn't significantly higher, showing it's not the killer supply that's pushing price down but rather the demand phasing out a bit.
Wiser men before me have repeatedly mentioned the speed with which those who have lesser to unlearn learn. Although I have believed it, this statement was never really put to a test. The only one I know with minimal trading experience has been 40D and he's a resounding success. Yes, I know he still has a lot to learn but lets just say he's not too bad. His superb display to hold a position all the way from the depths of hell to the heights of heaven were quite spectacularly on display in real time today. He even had the temerity to put a hard stop and then go do other chores while his account grew as the gods kept smiling at his balance sheet and bravery. There were some mortal souls who were in complete awe at his ability, including yours truly, although I did quite well not to show it. Then, from some dark ashen corner of my brain arose a brilliant idea...
If all it takes to become super is to know little before learning to trade, there could be candidates who would fit this criteria and be potential super traders in the shadows. As it turns out there is a friend of mine who fits the criteria. His name is an unusual Tonka. Obviously his parentage is not local. I have decided to train this almost best friend of mine to trade. Tonka has shown signs of following the movements quite dexterously, up and down and sideways, even at rapid speeds. With this brilliant idea in mind I have started my friend into just observing price for now. I am hopeful Tonka will in due course come to redefine what trading and learning is all about. There are of course some weakness as well. Tonka's ability to focus for prolonged periods of time is not the best. This has led me to concentrate his limited focus towards intra-day trading. He seems the most excited at the open when the prices are in a frenzy. His eyes dart from here to there, following each curvature the movement of price makes with utmost alacrity. Oh, I so hope my friend makes it into this treacherous field where so many before him have perished. I'll surely update you about Tonka's progress, but first let me take him out for a poo poo walk...
Gringo
Wiser men before me have repeatedly mentioned the speed with which those who have lesser to unlearn learn. Although I have believed it, this statement was never really put to a test. The only one I know with minimal trading experience has been 40D and he's a resounding success. Yes, I know he still has a lot to learn but lets just say he's not too bad. His superb display to hold a position all the way from the depths of hell to the heights of heaven were quite spectacularly on display in real time today. He even had the temerity to put a hard stop and then go do other chores while his account grew as the gods kept smiling at his balance sheet and bravery. There were some mortal souls who were in complete awe at his ability, including yours truly, although I did quite well not to show it. Then, from some dark ashen corner of my brain arose a brilliant idea...
If all it takes to become super is to know little before learning to trade, there could be candidates who would fit this criteria and be potential super traders in the shadows. As it turns out there is a friend of mine who fits the criteria. His name is an unusual Tonka. Obviously his parentage is not local. I have decided to train this almost best friend of mine to trade. Tonka has shown signs of following the movements quite dexterously, up and down and sideways, even at rapid speeds. With this brilliant idea in mind I have started my friend into just observing price for now. I am hopeful Tonka will in due course come to redefine what trading and learning is all about. There are of course some weakness as well. Tonka's ability to focus for prolonged periods of time is not the best. This has led me to concentrate his limited focus towards intra-day trading. He seems the most excited at the open when the prices are in a frenzy. His eyes dart from here to there, following each curvature the movement of price makes with utmost alacrity. Oh, I so hope my friend makes it into this treacherous field where so many before him have perished. I'll surely update you about Tonka's progress, but first let me take him out for a poo poo walk...
Gringo
XLU has quite an interesting price behaviour. The trend for the utilities has been up since 2009 so we're in a bull market for this sector. There's also this visible hinge forming. Now the hinge apparently is quite normal, except when one looks at the volume. Having a hinge allows the supply and demand to come to an agreement which generally leads to lower volume. Both sides start getting tired and accept the price and just gyrate around the apex of the hinge. Or perhaps I should say it's the gyration of price that creates the hinge in the first place and not the hinge that forces supply and demand to play around the apex. It's just to put the horse before the cart.
Now notice the higher volume, and quite a bit of it. This higher volume doesn't indicate calmness or price reaching an agreement. The intensity from both supply and demand is high. Having this high intensity means neither side is accepting that price is at the right place. There's a feisty fight going on and this might affect in case price breaks out of this hinge. There may still be sufficient strength in the opposing side to stall or slow down the movement. We don't know whether it's a certainty but it sure is something to keep an eye on. The breakout if it ever comes might not be the cleanest. I haven't experienced many hinges with this kind of high volume and I look forward to learning from this.
Someone who's only looking at the shapes might not be able to see the underlying struggle that's taking place within this hinge. At times, yes, it is better not to get distracted by all the extra information. At other times, it might keep a person alert to any sudden changes if they come and act appropriately. I do believe in trading purely on price action and sticking to one's exit and entry strategies and once a move begins it's the price that's king.
XLU Weekly:
Gringo
Now notice the higher volume, and quite a bit of it. This higher volume doesn't indicate calmness or price reaching an agreement. The intensity from both supply and demand is high. Having this high intensity means neither side is accepting that price is at the right place. There's a feisty fight going on and this might affect in case price breaks out of this hinge. There may still be sufficient strength in the opposing side to stall or slow down the movement. We don't know whether it's a certainty but it sure is something to keep an eye on. The breakout if it ever comes might not be the cleanest. I haven't experienced many hinges with this kind of high volume and I look forward to learning from this.
Someone who's only looking at the shapes might not be able to see the underlying struggle that's taking place within this hinge. At times, yes, it is better not to get distracted by all the extra information. At other times, it might keep a person alert to any sudden changes if they come and act appropriately. I do believe in trading purely on price action and sticking to one's exit and entry strategies and once a move begins it's the price that's king.
XLU Weekly:
Gringo
a hinge actually resembles indecision and is usually a tug of war ,
if we focus on the Vol. we can see that the selling wave from X to Y
is acompanied with Huge Vol. and this is the first time since aug 2011 we
see an increase of Vol to the downside, and as the rallie from A to B has increasing Vol.
but fails to make a new high , i would consider XLU to be technically weak.
and would even consider a short play within the hinge
