Volume Patterns Suggest Professional Accumulation
Volume pattern discussion today. I've been bullish on the Emini since the end of March. But the Emini's large drop with large volume on Wednesday made it look like this leg of the uptrend might be over. Since Wednesday though the volume patterns suggest the Emini might go higher.
Volume Patterns (Emini daily)
Large volume down days, like Wednesday, are scary. But maybe that's what the Professionals want you to think. Maybe they wanted to scare you out of your long positions and go short?
If the top was in and the market was going down, why on Thursday did we break Wednesday's low by only 1.25 points? The volume was lower too, showing almost no follow through.
Then on Friday we had a gap open below Thursday's low - again, maybe designed to scare the public out of their long positions? In the end Friday closed up, on low volume and low range - a classic high volume churn and "No Supply" volume pattern.
My best guess is that professional accumulation has been taking place over the last 3 days and the uptrend will resume this week. My only concern is the chart below.
Hilbert Sine Wave (Emini weekly)
This chart shows a cross on the weekly Hilbert Sine Wave and we are approaching a cyclical top. Confirmation happens when the low of the previous week is taken out - and we came within 0.75 points of this on Friday.
The Hilbert Sine Wave can signal early and that's what I'm guessing in this case. In addition to the volume patterns we've also got possible bullish divergences setting up on my swing trading oscillators - TRIN and Put Call Ratio.
Monday and Tuesday's Emini trading will give us more clues. But the volume patterns suggest to me we're heading higher. Good luck with your Emini trading.
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Profit Taking Volume Pattern
Volume pattern showing professional profit taking on Friday. The Emini gapped up on Friday and we had a large volume (2.0 million contracts), low range (13 points) day.
The large volume and low range indicates a high volume churn day. This was also a "Stopping volume" pattern with the volume higher than the day before but the range was smaller - and the Emini couldn't make it through the 1,400 level. Add in that the market was gapped up as the non-professional traders chased prices and this was a perfect day for professionals to take profits.
I'm not saying that the top of this move is in - just be careful not to jump in late. My medium term forecast is still bullish but that doesn't mean we won't have retracements along the way. Time to watch and see what the market will do next.
TRIN Indicator Update
TRIN Indicator (Emini daily)
TRIN indicator signaled a bearish divergence warning signal on Friday. So looking to take profits on the last trade and possibly set up for a reversal trade. Follow this link to read more about the Better TRIN indicators.
Good luck with your Emini trading.
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Bullish Volume Pattern
Bullish volume pattern at the end of today. The Emini gapped up 15 points this morning and the professionals immediately took profits.
Trampoline Volume Pattern (Emini 15 minute)
The gap was closed in the afternoon on a Climax volume pattern down bar followed by a high volume Churn bar (red then green volume bars). Then the Emini took off with 2 consecutive Climax volume pattern up bars. I like to call this combination of 2 Climax volume pattern bars in opposite directions the Trampoline volume pattern.
In the chart above there are 4 Trampoline volume patterns shown. These patterns aren't infallible - a break below the low of a bullish pattern or break above the high of a bearish pattern will signal the failure of the pattern. So a break tomorrow below 1,345 would negate this bullish volume pattern.
You can read about other volume patterns here. Good luck with your Emini trading.
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Emini Volume Patterns - Trampoline Examples
Some Emini volume pattern examples shown today. The Emini closed down 12.50 points at 1,408.50 on volume of 2.2 million contracts.
Still holding the long swing trade, entered at 1,411. But the Emini has fallen from a high of 1,436 to a low of 1,400 in the last 24 hours. All my Emini oscillators have now turned up so I'm sticking with the long trade.
Emini Volume Pattern - Trampoline Examples
If you're using the Better Volume indicator these patterns are easy to spot. I call them Trampoline volume patterns - because when they signal long it looks like the market is bouncing off a trampoline. But they work equally well on the short side.
The pattern consists of a volume climax bar in one direction, followed closely by a volume climax bar in the opposite direction. For determining the direction I use a close above or below the bar's median price.
The chart above shows 3 Trampoline shorting signals on the 1 minute Emini chart. The first signaled a 5 point move, the second a 3 point move and the third signaled a 9 point move. I wish all Emini volume patterns worked out that well.
Apologies if you've had trouble accessing the Emini-Watch site over the last 2 days. I've had problems with a WordPress plugin and MySQL database corruption. Should be fixed now. Good luck with your Emini trading.
Thursday 3 January 2008Emini Volume Pattern - No Supply at 1,450
Emini volume pattern today. The chart below shows the Emini bounced off the 1,450 level again today. However, with each bounce since 18 December the volume has been declining - showing a lack of supply. The bottom of this latest down move could be in.
Emini Volume Pattern
We also have a cyclical up turn in the Hilbert Sine Wave on the 135 minute Emini chart (my primary swing trading time frame), shown on the chart below.
Emini and Hilbert Sine Wave (135 minute)
In addition:
- Doji candlestick pattern today, showing indecision and a possible turning point
- Better TRIN Oscillator is oversold at -118
- Reversal bar on the US Dollar versus Japanese Yen
Let's see if the 1,450 level holds. Good luck with your trading.
Friday 16 November 2007Volume Patterns - Stopping Volume on Indices
Back from a month traveling in France, Italy and Egypt. Thank you for everyone's patience and hope your trading is going well.
Highlight was the Old Cataract Hotel in Aswan overlooking the River Nile. This was the setting for the movie of Agatha Christie's "Death on the Nile" - totally relaxing and highly recommended. View of the Nile at sunset from the hotel shown below.
Now to the markets. Friday saw Stopping Volume patterns on all the indices. Stopping Volume occurs when the volume is greater than the previous day (or bar) but the range is less than the previous day (or bar). This volume pattern signals a pause in the current trend and beginning of a pullback, sometimes leading to a complete trend reversal. The daily Dow chart is shown below.
Stopping Volume Pattern on Dow (St = stopping volume)
The NASDAQ has been the strongest of the markets over the last month. The Stopping Volume pattern also appeared on Friday's NASDAQ. See the chart below.
Stopping Volume Pattern on NASDAQ (St = stopping volume)
Finally, the chart below shows the Russell with Stopping Volume pattern on Friday.
Stopping Volume Pattern on Russell (St = stopping volume)
I'm not convinced that the current down trend in the Emini is over, however, we might see a pullback this week. In addition to Stopping Volume there are other positive signs:
- Versus the Bond market the Emini is over-sold
- Bond market staged a strong rally 20 days ago
- TRIN divergence on Friday (positive TRIN but Close < Open)
- Yen appears to have made a higher low and could start trending up
- Thanksgiving this week and markets tend to be strong going into a holiday
Good luck with your trading. You can read more about the Stopping Volume pattern here.
Thursday 9 August 2007Volume Patterns - Stopping Volume Yesterday
Stopping Volume pattern yesterday forewarned of turning point. The Emini closed down heavily today - down 46.25 points at 1,457.75. Tuesday's post about trading with multiple time frames explained why we were looking for a turn down. Then yesterday we got a Stopping Volume pattern with higher volume and lower range, showing that professionals were taking profits. You can read more about the Stopping Volume pattern here.
Stopping Volume Chart Pattern
The chart below is just a recap of the expected Hilbert Sine Wave crossover in the 135 minute time frame. Having the Stopping Volume pattern in the higher (daily) time frame added confirmation to this likely turning point.
Sine Wave Turn Coincides with Stopping Volume Pattern
Wait for Stopping Volume pattern to halt the drop
Where to from here? My other oscillators - Trading Index (TRIN) and Smart Money - have now turned over. However, they are nowhere near over-sold yet. Time to wait for this final move to "Complete" and look for exhaustion volume patterns before going long.
Tuesday 17 July 2007Volume Chart Patterns - The Essential High Churn Pattern
The Emini closed down 1.00 point at 1,558.75 on Tuesday. In yesterday's Emini commentary we said that "No Demand" and "High Churn" patterns tend to appear at market tops. Well today we got the "High Churn" day. The chart above shows the 3 patterns circled - NoD stands for "No Demand" and Ch stands for "High Churn".
"High Churn" days occur when the volume is relatively high but the range is small. You can read more about "High Churn" patterns here. In the volume indicator on the Emini chart above, high churn bars are colored green and volume climax bars are colored red.
My best guess is that the Emini will fall over the next couple of days until it reaches support. The first level of support is around 1,540 with the second level of support close by at 1,530. Keep in mind the COT data shows the Professionals are very bullish and so any weakness in the market might be short-lived.
Volume-Based Patterns - The No Demand Pattern
The Emini closed virtually unchanged at 1,559.75 on Monday. Volume was below average at 1.1 million contracts traded. We have now had 2 days in a row with "No Demand" volume patterns ('NoD' on the chart above).
"No Demand" volume chart patterns occur when the Emini makes a new high, but on lower volume and smaller range. In addition, I like to see a close in the lower part of the day's range. The basic TradeStation EasyLanguage code is as follows:
H > H[1] and H > H[2] and V < V[1] and V < V[2] and (Range < Range[1] or Range < Range[2])
A lot of technical analysts believe that top and bottom chart patterns are symmetrical or are a mirror-image of each other. A typical "proof" of this assertion is that given a chart with no time or price axes, a trader would not be able to tell which way up the chart should be. My research disagrees with this view.
The Emini tends to make bottoms on high volume but tops on low volume. In addition, bottoms are made quickly whereas tops are made slowly. "No Demand" and "High Churn" patterns tend to appear at these market tops.
My best guess is that the Emini is currently making a short term top. Longer term there are two opposing forces. The latest Commitment of Traders report was very bullish. On the other hand, we are approaching a seasonally very bearish time for the market.
Stopping Volume chart pattern marks the low of the day
The Emini closed up 8.75 points at 1,535.75 on Thursday. Early today we got large buying volume coming into the market. The chart above shows the Stopping Volume and Doji Candlestick patterns. These coincided with a cyclical low turning point on the 135 minute time frame.
The Composite Trend Oscillator is over-sold and yet to turn up. However, because of the volume pattern and cyclical turn my best guess is that the Emini will continue to rally. We have retraced to the 50% level (1,536) of the last down swing and so we'll probably see selling early on Friday. If I'm right, this selling volume will be absorbed and the Emini should rally higher.
Wednesday's short position was closed out at 1,525.00. We made 10 points (profit target) on the first contract and 28 points on the second contract, giving us an average of 19 points be contract. Assuming you trade US$8,000 per contract, that's a 11.8% return. We're looking to enter the next long trade at 1,533.00.
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