Monday 20 May 2013
Nice Test
The chart below is a 10 minute chart of the Dow Jones. Notice at Point A we see a classic test - a down-bar, closing near the high, and the volume is low (it is not less than the previous two bars, which is what we would ideally like to see, but the fact that it is quite low and the bar has dipped down only to close near the high is a good indicator of strength). Also, this test appears just after we've seen weakness on the previous bar. Point A is testing the supply on the previous bar. It has discovered there are no sellers, so it is a successful test and the market rises. I took my 20 points profit, thank you very much. Off for a bath and an evening out.
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Hello Rita,
ReplyDeleteNice to hear from you. The previous red bar from A (3 bars to the left), although there is no signal there - can that be interpreted as No supply? The bar before that (4 bars to the left from A), can it be interpreted as a test bar?
Edmond
Hi Edmond,
DeleteThe 'test' bar you question - I would not read that as a test. Although most of the bar is below the close of the previous bar, it is difficult to read. If you see the high volume to the left, you could say your 'test' bar is a no demand, but either way, it is very difficult to read, and to be honest, I can't answer your question. The 'no supply' bar could be just a down-bar as a result of the 'no demand' bar before it. So to cut a long story short, if it is not clear then leave it alone. The first and obvious signal I saw in the chart was Point A, a clear test. Only trade on really clear signals. If you are not sure then stay away.
Thanks for the detailed explanation. You brought up a very good point - when to admit "I don't know" - I suspect it is not wired into guys' DNA :)
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