Barrometrics Views: The Wide Range Breakout Day
On Thursday, on the S&P (basis cash), we saw a day with a 26 point range and a Normalised Volume Reading of 5,107,846,144. Since May 8 (Left Shoulder of aborted H&S), the daily range has been 16 points with standard deviation of 6 points and Normalised Mean Volume of 4,025,661,196.
I tell you this because over the next 2 blogs, I’ll be considering a bar I call a Wide Range Breakout Bar.
A wide range breakout bar is one where:
- the range is at least greater than mean and preferably, mean + 1 to below mean +2. And,
- the volume is also with greater than mean and preferably, mean + 1 to below mean +2.
- the structure is one where at least 50% of the bar is above the breakout point and the bar exhibits buying conviction (for an upside breakout) i.e. we have a close now lower than in the top third of the range and the open no higher than in the bottom third of the range.
- the breakout is NOT concurrent with a major news event e.g. a CPI release.
If I see a wide range breakout bar, I will assume I shall not see a pullback to the breakout point - a response I consider to be the norm.
If we examine Thursday’s bar, we see that it has qualified on all 4 grounds (Figure 1).
FIGURE 1 WRB Thursday July 23 with Normalised Volume.
Charts courtesy of Market Volume
With a WRB what I expect to happen is for the market to test the 50% level of the directional move and then resume the move in the direction of the breakout. Figure 2 shows that this is what occurred on Friday.
Figure 2 30-minute Chart with Market Profile
Charts courtesy of Market-Analyst
So on this basis, can we conclude that ES will resume its upmove tonight? Unfortunately, the situation is not as clear as I’d like it to be. More tomorrow.
By the way, you can find timely comments as markets unfold at the Video/Forum/Twitter service. To join, register for the weekly video.
CASHFLOW TODAY :
Shanghai Composite and more
http://www.cnbc.com/id/15840232?video=1196011481&play=1
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