Volume Spread Analysis
- Thread starter karthikmarar
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Karthik Sir, or just anyone knowledgeable, can you help me on this:
in the light of what we have discussed so far.
in the light of what we have discussed so far.
Can you please name the stock so that I can analyze it with my charts
Last edited:
Re: Thoughts on VSA
Pseudo upthrusts will generally occur when price is treading the fringes of a previous known area of supply (resistance) from below. This can be confirmed from the price action and pivots on the left. If price has reached the fringes of a known resistance area on the previous day, you would do well to look out for the open the next day and WAIT!. The SM has two choices,
(a) To gap up the open above the old reistance. This indicates the SM's commitment to bullishness. This is to discourage selling by traders who are holding stock at previous resistance price range in the hope for more gains! But herein lies the delicate balance, You have to wait to see if the market makers are selling into the gap or not and if the SM is prepared to absorb the selling.
(b) To open near previous close and to mark up the price rapidly. This indicates that the SM is not very bullish and is probing upwards in the resistance zone to see the market reaction. Depending on the reaction, the SM will decide upon further course of action. If the volumes are medium to medium-high and the price is not moving up (ie high equal to or not too much greater than previous high) then it's time to jump ship as the aim of SM this time is not to gun shorts stops (if they manage it then it's a bonus) but to distribute as much stock as possible before the intermediate down trend sets in (as it invariably will).
In both the cases it is better to wait & watch till almost the final outcome, as no amount of tape reading (in the absence of level 2 trading screen) or volume analysis will give a very clear picture in the intraday timeframe.
Pseudo upthrusts will rarely occur in areas of new price territory. That is not to say that Pseudo upthrusts are not potent.
Regards,
Pseudo upthrusts will generally occur when price is treading the fringes of a previous known area of supply (resistance) from below. This can be confirmed from the price action and pivots on the left. If price has reached the fringes of a known resistance area on the previous day, you would do well to look out for the open the next day and WAIT!. The SM has two choices,
(a) To gap up the open above the old reistance. This indicates the SM's commitment to bullishness. This is to discourage selling by traders who are holding stock at previous resistance price range in the hope for more gains! But herein lies the delicate balance, You have to wait to see if the market makers are selling into the gap or not and if the SM is prepared to absorb the selling.
(b) To open near previous close and to mark up the price rapidly. This indicates that the SM is not very bullish and is probing upwards in the resistance zone to see the market reaction. Depending on the reaction, the SM will decide upon further course of action. If the volumes are medium to medium-high and the price is not moving up (ie high equal to or not too much greater than previous high) then it's time to jump ship as the aim of SM this time is not to gun shorts stops (if they manage it then it's a bonus) but to distribute as much stock as possible before the intermediate down trend sets in (as it invariably will).
In both the cases it is better to wait & watch till almost the final outcome, as no amount of tape reading (in the absence of level 2 trading screen) or volume analysis will give a very clear picture in the intraday timeframe.
Pseudo upthrusts will rarely occur in areas of new price territory. That is not to say that Pseudo upthrusts are not potent.
Regards,
We looked at the Upthrust and Pseudo Upthrsts.. We also looked at what to look for in an Upthrust Bar.
The obvious next question would be What to do when we see an Upthrust.
The next bar after the UPthrust is very important. That helps us decide our action.
If the next bar is a Downbar closing down it is clear that the weakness and set in and the immediate trend is reversing. Here again the volume is an important indication. If the volume is high then it time to get out and wait to short. If the volume is low the weakness is not so pronounce and it may be worthwhile to wait and watch next bar movement. Here the spread and the position of Bar also give clues. If the Bar is wide closing down the weakness is more pronounced. Also if the high of the bar is towards the low of the Upthrust bar the weakness is enhanced.
If the down bar is with low volume and closing Up then the weakness of the upthrust bar is still in question. We have to wait for the enxt bar for confirmation.
If the Bar after the Upthrust bar is an Upbar closing up then it would mean that the weakness projected by the upthrust is negated.
The obvious next question would be What to do when we see an Upthrust.
The next bar after the UPthrust is very important. That helps us decide our action.
If the next bar is a Downbar closing down it is clear that the weakness and set in and the immediate trend is reversing. Here again the volume is an important indication. If the volume is high then it time to get out and wait to short. If the volume is low the weakness is not so pronounce and it may be worthwhile to wait and watch next bar movement. Here the spread and the position of Bar also give clues. If the Bar is wide closing down the weakness is more pronounced. Also if the high of the bar is towards the low of the Upthrust bar the weakness is enhanced.
If the down bar is with low volume and closing Up then the weakness of the upthrust bar is still in question. We have to wait for the enxt bar for confirmation.
If the Bar after the Upthrust bar is an Upbar closing up then it would mean that the weakness projected by the upthrust is negated.
Let us look at another indication of weakness. If the stock has been moving up on a high volume and then we encounter a down bar closing down towards low on high volume is a sign of weakness. Volume need not be very high. Ideally the volume should be higher than the previous two bars.
If you look at the enclosed chart the stock was moving up on higher volume. Then we have the down bar closing down near the low. The volume is higher than the previous two bars. Looks like the SM have been distributing. The next bar looks more like a test for supply. The volume is low and the stock closing up. The low volume indicates supply is lower. Then again a downbar on higher volume. The weakness is more pronounced now. What followed is obvious
If you look at the enclosed chart the stock was moving up on higher volume. Then we have the down bar closing down near the low. The volume is higher than the previous two bars. Looks like the SM have been distributing. The next bar looks more like a test for supply. The volume is low and the stock closing up. The low volume indicates supply is lower. Then again a downbar on higher volume. The weakness is more pronounced now. What followed is obvious
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