Wednesday, March 03, 2010

How Resistance Areas Develop: When Volume Becomes Two-Sided


If you click on the chart above, you'll see where very heavy relative volume entered the market as we approached the 1124 area in the ES futures. Notice that the volume is relatively two-sided: there's is plenty of volume hitting bids as well as lifting offers. That tells us that longer-timeframe traders are seeing selling opportunity in the higher prices, luring them into market participation. It's when we see relatively one-sided trade turn into a two-sided trade that we begin to form areas of price resistance and support.
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