Previously I posted about a Wyckoff principle called
springs - click here
and their mirror image opposite called
upthrusts - click here
Then I posted about a principle called
bullish absorption - click here
Following that was about a VSA principle called
End of a Rising Market - click here
and then the mirror image opposite called
Bag Holding - click here
Then we considered
Looking for Trades at the Edges of Trading Ranges - click here
and two weeks back we looked an example of a
Potential Accumulation Zone - click here
Last week we looked at a VSA principle called
Upthrusts - click here
I thought an example of a Serious Supply Event and then the subsequent price action, might be interesting to look at.
In this example (below) price accelerates higher, then forms a fairly obvious high after some potentially serious selling pressure comes in (arrowed). Price then breaks down in response to the negative influence the selling has created. Following that price makes a pretty good attempt at consolidating the damage that has been done. Then an upbar with a wide spread appears to breakout above the consolidation on very high volume. However, the next two bars following it are down, and on increasing volume. At this point you should be very wary that the upbar which appeared to be a sign of renewed strength after the period of consolidation, was actually ongoing weakness (as it was actually 'full of supply'), and the negative influence that began with the initial supply event continues.
In this case I generally use the low of the upbar on high volume, as the 'line in the sand', although in this case a trend line drawn would also have been useful, and if this level is clearly broken and closed below, then the consolidation will most likely fail.
View attachment 741369
cheers
