Chart - BPT, page-752

As mentioned in my previous post, the red denoted line (not the sell side liquidity one), represents the midway point or equilibrium between the first quadrant of the anticipated range. See my first few posts to see where and what this is.


Notice what happened when we're nearing this level of institutional interest, orders were stacking on both sides of the market. This is called engineering liquidity. What happens is simple, buy orders are first tripped in and then distributed to sell orders which coincide with the institutional level of equilibrium. This provides market makers with sellers at a cheap price. Think about it, if buy orders are tripped in after taking a short-term high breakout long traders and short sellers are placed into the market - this is perfect counterparty for smart money traders who are bullish. Smart money traders understand this, and look for the nearest low to be violated that supports institutional interest. The low is violated to punish any breakout long-traders and take their protective sell stop (i.e., which smart money buys) - this is the counterparty liquidity sought.

Because of this, the latest swing is called a balanced price range, meaning if we return to 1.305 - 1.310 it is a low risk buy. We actually returned exactly to this level prior to closing, and saw the market propell away from it. The fibonacci shown on the chart outlines areas of true support and resistance and targets, the magnet shows the long-term draw on liquidity as mentioned long ago. Seeing as we seem to be on the buyside of the curve, previous "gaps" and voids on the sell side can be now used as buys as well.