I nominated IFL as this week's chart because of the widespread high volume upbar that looked strong at the time, but subsequent trading suggests it was actually full of supply. I also posted about this principle midweek on last weeks charting thread, so I wanted to show it in action.
Whenever you see a widespread, high volume upbar, you should first wonder if it is actually weak (full of selling), and not 'can I get in for some quick cash'.
That doesn't mean bars like this are always weak, but the thought should cross your mind. Then watch the subsequent trading to confirm either way.
Tom Williams would often say "When serious selling is first seen, it will be seen on an upbar"
What he meant by this, was that when professional traders choose to begin the distribution process (not just a bit of minor supply, but a proper full blown distribution by a group.....'sell the lot', and 'set up short positions' where possible), they will start with a widespread upbar, usually on some sort of really good news announcement, either by the company alone, created by the sellers themselves, across the sector, or a combination of them.
In this specific case, it was a single supply event (perhaps by just an individual group), and probably not a full blown distribution by all involved, whereas a full blown distribution would take 'some time' to complete, often 'much more time' than this.
Note the ongoing high volumes and widespreads following the upbar, there quite a bit of volatility going on at the time.
Once the low of the widespread upbar had been taken out, the price action was confirmed as weak, and price has broken down a second time since then.
This week though, spreads and volumes have reduced somewhat, so the volatility is not as strong now, and most of those who bought on the high volume upbar as a short term trade, may have already realised they made an error and sold out (for a loss in disgust).
So there might not be a whole lot more downside to come......we'll see.......I will watch for some signs of buying or support next.
