I am back from the NYC Traders’ Expo. It was another great experience. I got a chance to meet several traders who are in Deep Practice and/or who have taken Chart Reading Mastery – it was great to meet face-to-face. Thanks for making the effort to say, “hi.” I only wish we had more time to spend together. As is usually the case, it gets a little hectic with all the activities.
Looking at the market, we have a solid trend up, but I am seeing the potential for a reaction building. On the posted daily chart, last Wednesday saw larger volume come in to the downside. This is labeled A. The volume is the largest we have seen in a while, and indicates the presence of some selling.
The next day (B), the market rallies right back up, so clearly, there are buyers present as we would expect in such a strong trend. Since the market dipped underneath the low at A and rallied from there, it appeared then that the selling had dried up. But look carefully at the next day, bar C. The market pushes higher, but does so on small range and very light volume. What happened to the buyers?
Buyers also couldn’t hold new highs on D. We see a pick up in volume over the previous day and the market closes flat – no net progress up. Yesterday (not labeled), buyers were unable to rally the market higher, and we see a lower close.
While supply needs to prove itself here to drive a pullback, the conditions seem ripe. The key level at the moment is the 1353 area. I’ve drawn a blue line across that price level. You can see that price has been trading around this level for a couple of weeks. The market needs to rally away from here to avoid a pullback. If it can’t, we may see supply step in again and start to take advantage of the recent weak demand.
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