Monday 16 July 2007

Volume-Based Patterns - The No Demand Pattern

Emini No Demand Volume Pattern Image

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.



Read more about Volume Patterns



Recommended Emini Trading Sites

Free Emini Trading Report

Emini Trading Report
Emini Trading - Free Report Coming Soon!

Get Free Email Updates