Note how volume has accumulated at two price areas so far today in the ES contract: the 1141 area and the 1144 area. This accumulation occurs when the buyers, who had been controlling the day's trade, finally are met by sellers who see opportunity in fading the price highs.
These volume bulge areas become price magnets in subsequent trading, acting as resistance to further gains and serving as support on valid upside breakout moves. How price treats those magnet levels in real time tells us a great deal as to whether fresh buying or selling sentiment can take control of the market.
In a strong market, of course, we should see bulges at progressively higher price levels, as price continually rejects these equilibrium points in search of new equilibria. When price cannot take out these price magnet levels, we often see a transition from a strong market to a range trade.
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3 comments:
Brett,
Your post shows a clear understanding of the auction process. With 10 mins. left in the market, I wouldn't be shocked if 1147.25 gets taken out. We'll see. Thanks for the post. - Madi
That's a really useful chart and post you've made. What moves prices are not moving average or fibonacci levels etc, it's supply and demand. I used Market Delta a while ago on a trial and probably didn't give it enough time to learn and really understand the potential. I think I'll take another look at it.
Tim
www.eminifuturesblog.com
Great term: "Price Magnets". These can be key for short-term trading in volatile markets. For example, when markets close on an active trend day, like today, with the market going down and approaching the intraday lows, the low of the day will act very much like a "price magnet" and "suck" the ES contract down to touch the low. The same applies on a trend up day -- if the market is showing strength towards the end of the day and is closer to its highs than subsequent pullback lows, the high of the day will act as a "price magnet".
These can be among the highest percentage trades out there, as the closer the price moves towards the "magnet" the more and more traders who are facing the wrong way will bail on their positions, making the "magnet" a self-fulfilling prophecy.
Very nice term, thanks!
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