Volume Patterns: Volume Churn
The Emini closed down 2.00 points at 1,438.75 on Tuesday. Low volume day with only 0.7 million contracts traded and very small range of only 5.75 points. As a result the Volume Churn was high. Take a look at the chart and Volume Churn explanation below.
Am I alone looking at Volume Churn?
The chart above shows a histogram of Volume Churn below the daily Emini bars. To me, churn seems such an obvious market measure, but I’ve never come across it in any of the best trading books I’ve read. Just to recap:
Volume Churn = Volume / Range
Volume Churn can be calculated on any time frame, but I pay particular attention to daily charts for futures (and weekly charts for individual stocks). The vertical bars are colored red when the Volume Churn reading is higher than the last 20 bars.
Again, thanks to TradeStation EasyLanguage this is easy to code and appears automatically. Periods of high churn usually occur when the market is changing direction – either at tops of bottoms. The red line superimposed on the Volume Churn bars is the long term average reading.
We also had a No Demand pattern today. This occurs when a new high is made but the market closes near the lows on low volume and low range. Conversely, a No Supply pattern occurs when a new low is made but the market closes near the high on low volume and low range.
This pattern signals little appetite for taking prices higher or lower and often occurs near significant turning points. Again, this pattern is plotted automatically in TradeStation as a text object – below the bars for the bullish No Supply pattern and above the bars for the bearish No Demand pattern. On the chart No Supply is marked “NoS” and No Demand is marked “NoD”.
Trend oscillators have now become overbought and two of them have started to turn down. In addition, we have some exhaustion patterns with high Volume Churn, No Demand price pattern and NASDAQ closing down while the Dow was up. We could be close to the completion of this final Wave 5 up move.
Good luck with your Emini trading.
