When Price and Volume Disagree, Part Five

You really don’t need a ton of spaghetti lines and sophisticated whatchamacallits on your charts to spot when price is lying to you. You can use something as simple as Acme Volume Balance on a fixed-range bar chart (Range, Renko, etc) to assess the action in real time.

To quote a semi-famous Discovery Channel “survival expert” about staying alive in the wilderness with minimal gear:

The more you know, the less you need.

No matter how you feel about the person who said it, I think it’s so, so true in trading too. I’ve said it before and I’m going to keep on saying it. Price and volume are all you need.

This morning could you have seen the big crack in the ES coming? Maybe… maybe not. No one can predict the future. But you could have at least been prepared for a break before it happened. How?

Small steady rotations were rising but all the while the impulses of buying were waning, and the hanging tails below the zero line showed there were determined sellers and it might only be a matter of time before the buyers ran out of gas. Here’s what I saw…

Acme Volume Balance - Renko Rotations… what do you see?

0 replies
  1. Nash
    Nash says:

    Yes I agree with that observation with a caveat – it makes sense to incorporate such a tool only at areas of interest. Bit like a predator patiently waiting for prey to come to the favorite watering hole. The probabilities are staked in prey’s favor – ample opportunities (prey) within familiar environment (areas of interest).
    Thanks for your posts and lively discussions.

    • El Duque
      El Duque says:

      Totally agree. Pick your levels, for sure.

      Just pointing out that there is more than one way to read the tape. Folks who are starting out may not realize there are so many variations on such a simple theme. You just have try a bunch out to find the right fit.

  2. robbywon
    robbywon says:

    Totally agree–make your life easier – just use price and volume- when you get fancy you create unecessary baggage. Thanks again RD you rock the charts

  3. atoast2toast
    atoast2toast says:

    Apologies if this is obvious but I want to share it anyway as I traded it accordingly.

    Similar happened with the bounce up near the close of the day on Friday. It was a crowded short and sellers could not take the price lower than 1141/1142. There were 3 attempts with increasing selling pressure showing major -delta. The selling climax failed and there was rapid capitulation:

    The volume breakdown showed positive divergence and was a buy signal to me:

    http://atoast2toast.files.wordpress.com/2011/09/divergence.jpg *

    Price action was chaotic but those to me are the market conditions where you learn most.



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