- We have been witnessing as pound was ranging between 1.55 and 1.65 for a period more than 1 month. It was distribution phase where professionals have been distributing their positions to weak holders.
- In the end of distribution phase there was mark-up through upper trading range. Supply signal tells us about imbalance between supply and demand created because uninformed traders are buying in this move. High volume and closing of this bar in the middle says that professionals are busy selling to the weak holders.
- VSA is all about weak and strong signals in the market that we assess looking at overall picture. When the price comes to lower trading range, we see wide spread down bar. High volume and weak background tell us that this was a genuine break-out.
- Again we see high volume down bar before the price breaks support (previous low).
Now the price has come to another support. At the moment we do not see supply signals. Background is still weak. We need to wait further development because there is possibility that the price will start reaction to the down trend.
Like I wrote in the last post on the Yen, the trendline break was something to watch for a potential short, given the major supply signals behind (distribution). Watching the H4 timeframe for entry timing, short after there was a trendline break with good volume (red bar). There was demand at this area but this comes mostly from the prices hitting stop-losses of retail traders, which is something that also happens in most, if not all, supports break-outs.
Closed half order near the support, though could have closed it entirely due to the massive shake-out that took placed, market by a green (major demand) dot. Closed the rest of the trade on the 2nd strong signal, that together with the earlier shake-out, means there is now professional support of the market and the trend may come to an halt.
This kind of setup is all about taking advantage of the temporary imbalance of supply and demand. Market was correcting (red trend), while there was demand coming in. After the Dynamic Trend turns up, enter in a down bar, setting the suggested SL/TP by the Alerts indicator.
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In this USDCAD chart, minor demand and minor supply on higher TFs can be seen by the blue open circles. Other signals such as No-Demand/No-Supply are also now shown as Multitimeframe signals.
For some time now that I’ve been looking closely at the Yen’s daily movements. Prices are swinging around a resistance made back in 2007, and it’s interesting to note that so far there has been a rejection of new highs. Every time the prices went above it, there was supply and the prices came falling down, which is what’s happening right now. In the beginning of July there was some demand coming in near the up trendline, which sustained the prices, but it may not be enough. The market will next test the trendline, and if decisively broken, we can expect lower prices; if it’s maintained, we should trade according to the action on the resistance, and either wait for a break-out and a test for a long, or a false break-out with more supply signals for a short position.
In the H4 the recent action can be seen more clearly, with supply and really high volumes above the resistance, and where the background had already turned to weak.
In EURGBP there was a short opportunity at the start of the week, as the support was broken. In this setup, one of the important things to watch for are weak signals before the break, which there were on the last market top. This guarantees there is a ’cause’ for the prices to go down, since it means the smart money had started distributing, effectively betting on a successful break-out. From there on, the sequence for a result of +27 pips was:
1. Weak background
2. Enter in an up bar near the broken support
3. Close in the TP level the alerts indicator suggested. Right after, there was a very strong demand signal that reversed the market
