Day traders would do well to study the hourly chart for HIO...

Day traders would do well to study the hourly chart for HIO today for a text box setup and breakout, I've highlighted the six candles below with a description of what took place today and how this kind of pattern is very predictive of short term price direction:



The price had been ranging for several days, which on the hourly is the 20-30 candles leading into today's trading. The RSI had been trending down but moved upwards yesterday, breaking the downtrend and commencing a back test of that trend line in the first hour of trading today.

Once the RSI downtrend was successfully back tested the RSI started moving up again even though the price was still moving sideways and the volume was tapering right down to extremely low levels.

Right there the chart is telling you two things:

1. There are positive price movements that are speeding up (RSI increasing)
2. There is no supply to match the increasing demand (volume decreasing)

Importantly, it's not these two facts on their own that's significant... it's the magnitude that matters most... the 12pm candle and the 1pm candle were the lowest volume candles on the hourly chart since this uptrend started in March almost a month ago... on the hourly chart that's 120+ candles over that 4-5 week period so to see two candles back to back that are the lowest volume in 120+ candles is very significant.

Then you have the other dynamic of positive price movements speeding up (as shown by the RSI moving higher between 10am and 1pm) but there isn't any supply available so the net result of this is buyers have no choice but to find supply at higher prices and so the price starts moving higher, which draws in more buyers and the move up accelerates.

Anyone watching closely could have easily scalped 15% in 3-4 hours today and either stayed long with a nice buffer OR sold at the high for a tidy profit... while I am not advocating either strategy it's always interesting to break down the daily trading and try and learn from what took place.